The biggest economic surprise of last week was the sudden drop in German Retail Sales which collapsed -1.4% from 0.8% expected,  It turns out that this bit of news was foreshadowing further weakness ahead as the slew of Euro-zone data released tonight  confirmed a softening in European consumer demand. The EU Retail PMI numbers slipped below the 50 boom/bust for the first time in four months after reaching a two year high just the month prior. Higher oil costs and an unstable employment situation continued to weigh on the psyche of EU consumers, and Mr. Trichet's hawkish comments notwithstanding  should the slowdown persist it would put enormous pressure on ECB to hold off on the March hike. As we wrote in our weekly piece, "the message of last week's data  is that export growth can only take the EZ so far. Until the region develops some organic consumer demand, the recovery is likely to be sluggish and so will any rally in the EUR/USD."

As result, the EUR/USD broke the 1.2000 figure once again and was coming perilously close to the 1.1950 support in early European trade today. With the US economic calendar barren until Friday's  Trade Balance report and most of the key EZ data, with the exception of German Industrial Production already out of the way, trading may be influenced by to geo-political of ECB-speak risks for the rest of the week.

Boris Schlossberg is a Senior Currency Strategist at FXCM.