In Line Inflation and Employment has Little Effect on Euro


EUR/USD found a footing under 1.1150 after a fleeting foray below here earlier in the European trading session. After experiencing significant volatility on Monday, it appears that the EUR/USD currency pair will create an inside day around Monday’s highs and lows. The euro is now settled around 1.1180, still well off yesterday’s New York closing bid level at 1.1235. There remains a lack of commitment in the euro market as participants wait for what looks set to be the finale of the Greek saga with regard to its membership of the euro.

As expected Eurozone HICP data, which dipped to 0.2% year over year in the flash June reading from 0.3% year over year, had little impact. European stocks are down again, despite gains in Asia, Greek yields are at levels above 15% not seen since 2012, and peripheral Eurozone versus Bund yield spreads are wider. Volatility spiked to its highest level seen in 2015, as global stocks sold off on Monday.

Eurozone May unemployment held steady at 11.1%, as expected. The overall rate continues to hide marked differences, ranging from 4.7% in Germany to level of likely still over 25% in Greece. However, while Greece is sliding back into recession as the government stopped reform efforts, Spain is making progress and unemployment is coming down as growth picks up. The Spanish headline rate fell to 22.5% in May, still high, but down from 23.1% back in February. Youth unemployment remains a major problem, however, also due to ongoing rigidities in the labor market. The Eurozone’s other problem remains the low mobility of labor, which is exacerbated by language barriers.

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