The Euro (EUR) advanced to its highest-level in a week against the British Pound (GBP) on Thursday as positive unemployment data offered support; against the US Dollar (USD) the single currency was little changed.
Sterling got off to a poor start on Thursday after reports showed that consumer confidence declined in July and house price inflation eased. Whilst not considered major data releases the reports were enough to soften the currency in a week relatively devoid of market moving UK data.
The Euro took advantage of the UK data after a report released by Eurostat showed that the Eurozone’s unemployment rate fell unexpectedly in June.
The jobless rate dropped to 11.5% from 11.6% in May.
The figure remains close to the record of 12% but was less than economist expectations for an unchanged reading of 11.6%.
Joblessness continued to vary widely across the Euro area in June, from a low of 5% in Austria to 24.5% in Spain.
Investors continue to jump on any positive news out of the region as the jobless data proves.
‘As long as the economy doesn’t expand faster we won’t see a significant improvement on the European job market. Companies are reluctant to hire unless quarterly growth rates reliably exceed 0.25% for a longer period of time,’ said an economist at Daiwa Capital Markets Europe Ltd.
Surprisingly the single currency held onto gains against the Pound despite the release of a separate report which showed that inflation across the Eurozone fell closer to a five-year low in July.
Consumer prices in the 18 member Eurozone edged higher by 0.4% on the year in July, the weakest annual rise since October 2009 when prices fell by 0.1%, the EU’s statistics office Eurostat said.
Inflation across the Eurozone has now been in the European Central Banks danger zone of below 1% since last October and is not expected to reach its 2% target until 2016 at the earliest.
Next week sees the ECB hold its latest policy meeting. With inflation stuck at dangerously low levels pressure is building on the Central Bank to take more action to tackle the threat of deflation.
Today’s report showed that Spain has already slipped back into deflationary territory.
Euro Exchange Rates
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