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ECB's Mario Draghi faces inflation test (again)

2:33pm GMT - 02:04

German and Spanish retail sales bounce back strongly in October but it's small cheer for the euro zone. Latest data shows unemployment still at 11.5 percent for the third consecutive month - and inflation cooling to 0.3 percent in November, suggesting deflation remains a real threat for the ECB. David Pollard reports.

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It's been a steady drip feed of data through the week. Little of it offers any sign the patient's recovering. Quite the opposite, says Daragh Maher, FX strategy director HSBC, who says the euro zone's under pressure, so it's no surprise its currency is too - or its central bank. SOUNDBITE (English) DARAGH MAHER, FX STRATEGY DIRECTOR AT HSBC, SAYING: ''I suspect we'll be ... lower by the end of the day because as you said at the top, the picture is high unemployment and inflation getting further away from their target, so they'll have to act.'' It's not all bad news. German retail sales bounced back strongly in October after September's steep drop. Spain's retail sales have posted their biggest rise in a year. But inflation across the euro area slipped to 0.3 per cent this month. That's a five-year low. And unemployment is stuck at eleven and a half per cent or more for the third month in a row - youth unemployment over double that. In Brussels, the talk is once again of budgets - and how France, Italy and Belgium's are at risk of theirs bursting EU deficit limits. Although a decision on that issue has been postponed until March while the European Commission gathers more data. And, for investors, it's little distraction from the plight of the ECB. SOUNDBITE (English) DARAGH MAHER, FX STRATEGY DIRECTOR AT HSBC, SAYING: ''They're much more interested in the outlook for monetary policy rather than fiscal policy. And I guess the angle could be that the more arguments there are, then the more likely it is that monetary policy has to more of the heavy lifting to try and get euro zone growth going again.'' As ever, though, the timing of the next move by the ECB - whether it's the much hoped for QE or anything else - is still open to debate. SOUNDBITE (English) DARAGH MAHER, FX STRATEGY DIRECTOR AT HSBC, SAYING: ''It seems like the rhetoric we've had over the last while is seeking to delay expectations to the first quarter. They have the second tranche of the TLTROs is due December 11th so after this upcoming December ECB meeting. I think they'd like to see how that goes before deciding on action.'' ECB chief Mario Draghi is calling for action too - but on reform. In his latest comments saying that if member states fail on that front, they risk the essential unity of the euro zone.

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ECB's Mario Draghi faces inflation test (again)

2:33pm GMT - 02:04

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