German unemployment reflects markets

Yesterday’s focus was very much on the Euro-zone with a particular interest in the economic progression of Germany. Early releases showed a surprise increase in their unemployment rate from 6k to 21k in May. Despite this negative release GBP/EUR rates continued to worsen, underlining the weakness of the pound in the current market. Later in the day German inflation figures were slightly more positive, posting a year on year increase from 1.1% to 1.5%. This subsequently pushed GBP/EUR rates to near a 6 week low before recovering slightly towards the end of play. This recovery was aided by comments from the OECD, cutting their growth forecast for the Euro-zone to 0.6% contraction and raising concerns over the fragility of the European economic situation. This will be welcome news for buyers of Euros as the expected depreciation of rates is occurring at a far slower pace as traders react to mixed data from either side of the channel.

The pound has started on a positive note in early trading following Nationwide’s Housing Prices report that confirmed prices are starting to increase again with a 0.4% increase seen in the month of May and an increase to 1.1% on the year. These small gains may however be very short lived with US GDP figures out this afternoon and UK consumer confidence and net lending data both to be released by tomorrow morning.