Record unemployment sees the Euro drop to five-week low

Published: 2 Apr at 6 PM Tags: Euro, Dollar, America, Eurozone, Cyprus, USA, Germany, Ireland, Italy,

The Euro slumped to a five-week low against the safe-haven Yen after a string of less-than-impressive data releases for the 17-nation currency bloc.

Of particular importance was the news that the unemployment rate in the Eurozone reached a record high of 12 per cent in February. January’s previously estimated unemployment rate of 11.9 per cent was also upwardly revised to 12 per cent by Eurostat.

The current level of unemployment is the highest recorded in the currency-bloc since its formation.

Meanwhile, manufacturing PMI for the region fell from February’s level of 47.9 to 46.8 in March – edging further away from the 50 mark which separates growth from contraction.

Markit’s chief economist Chris Williamson issued the following statement with the PMI data: ‘The Eurozone manufacturing sector looks likely to have acted as a drag on the economy in the first quarter, with an acceleration in the rate of decline in March raising the risk that the downturn may also intensify in the second quarter. The surveys paint a very disappointing picture across the region, with all countries either seeing sharper rates of decline or – in the cases of Germany and Ireland – sliding back into contraction. While in some respects it is reassuring to see that the events in Cyprus did not cause an immediate impact on business activity, with the final survey results even coming in slightly higher than the flash estimate, the concern is that the latest chapter in the region’s crisis will have hit demand further in April.’

The poor results added to the pressures already weighing on the Euro (including the ongoing situation in Cyprus and the political uncertainty in Italy) causing the common currency to slide slightly against the majority of its most traded peers, including the US Dollar. Losses were tempered however as investors look ahead to the European Central Bank’s policy meeting, scheduled to take place on April 4th.

As one foreign exchange expert stated: ‘The PMI data was universally soft, and that’s pushed the Euro lower. There’s a downside risk with respect to structural issues and ahead of the ECB, which is expected to guide more dovishly given the economic misses’.

Similarly, currency strategist Lee Hardman commented: ‘Euro-area PMIs are stuck in recessionary territory. The ECB will acknowledge this week that the pace of economic recovery remains disappointingly weak, which will dampen upside potential for the Euro.’

Tomorrow’s consumer price index estimate for the Eurozone could inspire additional Euro movement.
As of Tuesday, 2nd April 2013, the Pound Sterling currency rates mentioned within this news item were as follows:

GBP EUR exchange rate was 1.1779, and GBP USD exchange rate was 1.5106.

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