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Euro May Extend Rally on Strong German Employment Figures

Euro May Extend Rally on Strong German Employment Figures

2010-09-30 02:36:00
Sumit Roy,
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The highlight of Thursday’s European forex trading session will be the release of German payrolls data. Before delving into the numbers, it is worth mentioning that employment in Germany is reported a bit differently than in the U.S. The largest economy in Europe releases a change in unemployment figure, which is in contrast to the U.S., where the data is reported as a change in employment.

With that said, we see that the consensus expectation is for a 20,000 decrease in German unemployment to be reported for the month of September. Such a figure would bode well for the European economic recovery, as well as the Euro currency, for it would maintain a 15-month trend of decreasing unemployment in Germany. The unemployment rate is anticipated to stay unchanged at 7.6 percent, but that is the lowest since November 2008, which itself is the lowest since 1992. Thus, we see that Germany has recouped all of the lost jobs from the economic meltdown of 2008/2009, which is obviously a much stronger employment situation than that of the U.S.

All else equal, the state of Germany’s job market remains a net positive for the Euro versus its main rival, the U.S. Dollar. That being said, the big economic concerns with regard to Europe and the Euro have to do with other nations in the region—Ireland, Portugal, Spain, and Greece, for instance—not Germany. Nevertheless, the forex market is presently of a more optimistic mind than was the case several weeks or months ago, with the Euro in the midst of a sharp rally versus the U.S. Dollar.

From a trading standpoint, the German unemployment figure can probably be taken at face value. A number better-than-expected will likely be interpreted as positive for the Euro, while a worse-than-expected number may be seen as a negative. The onus is clearly on Euro bears, however, as the trend is decidedly to the upside.

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