German Unemployment Ticks Higher in May, Euro Advances
German May unemployment rose just 1K over the month, with the jobless rate falling to 8.2% from 8.3% in the previous month. Expectations had been for a rise of 60K, so this was much better than expected and the unexpected drop in the jobless rate. The labor office said that changes have reduced the adjusted jobless numbers by 15-20K. The number of jobs, which is only available until April declined by 60K in April. At the same time, the German April ILO unemployment rose to 7.7% from 7.6% in March, as expected.
Meanwhile, the EUR/USD recovered from its lows to trade back in to the 1.3880 area. Buying interest was prevalent from 1.3800 in Asia, with Asian sovereigns and euro cross related flows providing support. Since the European open an Eastern European presence emerged at 1.3820 and interest picked up following the German May unemployment number, which rose just 1K and was much better than expected. The release also followed the improvement in Italian May business confidence to 68.7 and encouraged interbank demand and short term speculative activity. Outstanding 1.3900 option expiries are likely to influence and could potential hamper further upside momentum, particularly with the dollar in the ascendency. A break above 1.3900 is likely to trigger some stop loss activity, but the overall theme is still to sell the rally after the recent failure to sustain a 1.40 handle.