German Unemployment Falls 21K, ECB Tender Eases Fears

Fundamental Headlines

• ECB Tender Eases Funding Fears – Wall Street Journal
• EU Moves to Stanch Bank Fears – Wall Street Journal
• Banks and Euro Rally on ECB Tender Relief - Financial Times
• M&A Slowdown This Year May Persist After Deal making Fizzles in First Half  - Bloomberg
• Banks Seek Less ECB Cash Than Estimated in Sign of Health as Loan Expires - Bloomberg


EUR/USD: The German unemployment change for the month of June  fell 21K, while the unemployment rate remained unchanged at 7.7 percent as previously discouraged workers reentered the workforce. Today’s decline follows a revised drop of 41K unemployed persons in May, but was shy of economists’ expectations for a 30K decrease. Looking at the breakdown of the report, the unemployment rate in West Germany remained at 6.6 percent from May, while the jobless rate in East Germany fell from 12.0 percent to 11.9 percent in June. Also worth noting is the fact that the unemployment change is the smallest since February. Going forward, the labor market in Europe’s largest economy may deteriorate in the second half of the year as governments aims to implement tough austerity measures. Also on the economic docket from the region was the Euro-Zone inflation estimate. Figures from the Eurostat in Luxembourg showed that inflation slowed more than economists expectations in June as companies continued to cut costs. Consumer prices advanced 1.4 percent in June after rising 1.6 percent the previous month, while economists were forecasting the reading to rise 1.5 percent. 

Meanwhile, the European Central Bank said that commercial banks asked for EUR 131.9B in three-month loans ahead of tomorrow’s repayment of 442 billion euros that they borrowed from the central bank a year ago. Across the news wire, German Deputy Finance Minister Kampeter said he’s confident that European Union governments will act should planned publication of stress tests on banks reveal weakness.  Indeed, these stress tests measures are expected to be released next month, however, they may not disclose as much information as market participants are hoping for. Some economists fear that the outcome will not properly weigh on the banks’ strengths, nor include a sufficient amount of banks to get a clear picture of the health in the European markets. As of late, it is unclear what the repercussion will be for those banks who “fail” these stress tests measures. All in all, major headwinds remain for the 16-member euro area. To discuss this and other topics, please visit the EUR/USD forum.


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Written by Michael Wright, Currency Analyst
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