EUR falls across the board as data remains weak


Eurozone jobless rate held steady at 7.9% in December, in line with expectations and unchanged from the November reading. Official rates fell significantly last year and are by Eurozone standards at relatively low levels, with spare capacity in the labour market pretty much eroded in countries such as Germany. Cross country differences remain substantial though and youth unemployment remains high at 16.6% in December, even if this is already markedly lower than the 17.8% in December 2017. Youth unemployment rates of 6.0% in Germany contrast sharply with a rate of 32.7% in Spain and the 31.9% in Italy. There clearly remains much room for structural reforms to boost the labour market, but on the whole the improvement last year backs the ECB’s central assumption that rising wage growth will increasingly underpin underlying inflation in coming months.

Eurozone Q4 GDP growth held steady at 0.2% q/q, as expected. National data was mixed though with Spanish numbers earlier today coming in higher than expected at 0.7% q/q, while the Italian economy is now officially in technical recession, with the -0.1% q/q contraction in Q3 followed by a -0.2% q/q decline in the fourth quarter of 2018. Like French numbers yesterday, the Spanish rate also seems to have been boosted by strong exports, which could suggests that UK companies stocking up and preparing for a no-deal Brexit may have helped to compensate for the impact of the “yellow vest” protests in  France, which seem to have held back production in the last quarter of 2018. The diverging developments across Eurozone countries will do little to change the ECB’s increasingly cautious stance, although clearly most of Italy’s problems are once again home-made.

EURJPY on the Crossing EMA Strategy would have triggered lower today at 08:00 and completed a quick move down to T1 and T2. EURUSD and EURGBP look to be following in the Yen’s footsteps at 13:00.

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Stuart Cowell

Head Market Analyst

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