May 31 Friday 11:45 GMT
LONDON – The euro fell to 1.2968 against the dollar from the high of 1.3045 (-77 points) following a lackluster 25 pip range (1.3055-1.3030) in the prior Asian market. The euro’s decline stemmed from the release of weaker than expected economic data in the euro zone: weak German Retail Sales, the high unemployment rate and low inflation data.
Unemployment in the euro zone reached a new high of 12.2 percent in April from 12.1 percent in March which deepened the recession of the currency bloc in the first quarter. The number of unemployed people in the euro area rose to 19.38 million in April, an increase of 95,000 from the previous month. The young people unemployed stands at 24.4 percent. In Italy, the unemployment rate hit its highest level of 12 percent. Spain’s jobless rate is 26.8 percent while Germany’s jobless rate held at 5.4 percent.
Euro zone inflation rose 1.4 percent in May from 1.2 percent in April. The slight uptick of the inflation data is suggestive that the ECB may refrain from cutting interest rates further next week. However, the consumer price inflation is still far below the ECB’s 2 percent target in the first quarter.
Germany’s Retail Sales fell -0.4% in April, lower than the median forecast of -0.2% and compared to -0.5% in the previous month of March. German bonds advanced for a second day as investors sought the safety of fixed income bonds. The 10-year bund yields fell five basis points to 1.46% from 1.55%.
Last week, ECB President Mario Draghi called the attention of the euro zone countries to overhaul their economies as he said that conditions remain “challenging.” He added that the ECB remains committed to buy unlimited amounts of government bonds in exchange for implementing economic reforms.
European shares fell on month-end profit taking and position adjustments. Losses earlier in the week were driven by concerns that the U.S. Federal Reserve may reduce its quantitative easing policy sooner than expected. Euro Stoxx fell 0.95% to 2,772, German DAX fell 0.73% to 8,338, FTSE fell 1.05% to 6,587 at 11:00 GMT.
The 14-day moving average fell from 1.3040 to 1.2980 with a rebound to 1.2990. The 60-day moving average fell from the 1.3045 resistance level to 1.3005.