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Euro-Zone Unemployment Rate Rises as Euro-Zone Fundamentals Deteriorate
Friday, 28 November 2008 09:19:02 GMT  |  DailyFX Research
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Euro-Zone October unemployment rose to 7.7% and September data was revised up to 7.6% from 7.5% reported initially. The overall rise reflects sharp increases in countries such as Spain, France and Ireland, which are feeling the chill from a slowing housing market. German rates are holding up for now, but it is only a matter of time until the contraction in economic activity will be pushing unemployment rates up too.
Meanwhile, Euro-Zone November HICP inflation fell to just 2.1% y/y from 3.2% y/y in October. This was below initial expectations for a reading of 2.4% y/y, but not a surprise after weaker than expected German figures earlier in the week and the drop in the Spanish HICP rate to just 2.4% y/y earlier this morning. There is no breakdown with the preliminary number, but national data indicated that lower oil prices and positive base effects are the main reason behind the sharp decline, which brings the Euro-Zone rate within a whisper of the ECB's 2% limit for price stability. Inflation is coming down much faster than anticipated and we could even see negative numbers next year, which means the room for the ECB to maneuver has risen considerably. Bunds had rallied after the Spanish CPI and into the release of the Euro-Zone number, so that the immediate reaction to the number was muted. The December 10-year Bund future is currently up 47 ticks on the day at 121.73.

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