German Unemployment Falls As E.Z. Inflation Expectations Rise, Putting ECB on Alert
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EUR/USD– The German unemployment rate unexpectedly fell from a revised 8.1% to 8.0% against expectations for a rise to 8.2%. The number of out of work Germans dropped by 31,000, marking the ninth straight month that the economy didn’t add to its unemployment rolls. Demand from abroad has fueled growth but government officials have already warned that the economy is too reliant on exports and without a rebound in domestic spending the recovery could stall. However, an improving market in the region’s largest economy didn’t prevent total Euro-zone unemployment from rising to 10.0% from 9.9%, hitting double digits for the first time since 1998. Meanwhile, the E.Z> CPI estimate surprisingly jumped to 1.5% from0.9%, exceeding forecasts of 1.1%. If inflation begins tio accelerate then the ECB will find itself in a difficult situation as it may need to raise rates to adhere to their price stability mandate, which could jeopardize the regions recovery. To discuss this and other topics, please visit the EUR/USD forum.
USD/CHF– The KOF Swiss leading indicator rose to 1.93 from 1.90 improving for the eleventh straight month. A quicker than expected rebound in demand for luxury goods has benefitted the high-end watch industry which is helping spur broader growth. Emerging market demand is also growing as wealth accumulation in the BRIC economies has created new customers . However the Franc’s recent appreciation will threaten demand, which has the SNB ready to intervene in the currency market to limit further appreciation.
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