Euro exchange rate today: Italian unemployment hits record levels, 1.2 level still achievable by EUR-USD says one investment bank

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Category: Exchange Rates

Published on Tuesday, 31 July 2012 08:51

Written by Sam Coventry

The single currency is likely to remain constrained ahead of an eventful central bank calendar. The US Fed kicks off proceedings tomorrow with the ECB following suit on Thursday.

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The euro (Currency:EUR) has put a lid on recent falls; on a morning in which risk assets are certainly not in demand one would expect the euro to be sold off. And when we consider yesterday's market rises saw the euro sell off, it becomes clear that the relationship between the euro and risk may have decoupled for now.

The euro dollar exchange rate is 0.07 pct lower than at Monday's close at 1.2252.

The euro pound exchange rate is 0.04 pct in the blue at 0.7808.


The single currency is likely to remain constrained ahead of an eventful central bank calendar. The US Fed kicks off proceedings tomorrow with the ECB following suit on Thursday.

UBS advise that EUR-USD is on target to hit 1.2 within a month target. Indeed, a look at the fundamental Eurozone economic picture this morning suggests this target is easily attainable.

Italian unemployment is the highest since quarterly records began in 1999. The jobless rate hit 10.8% in June.

Analysts say Italy faces a real challenge in raising its chronically low levels of employment, especially for women, the young and the elderly.

However, there is support in the form of German unemployment numbers which showed the jobless rate has stayed at 6.8 pct in July despite fears of a rise.

The jobless total rose 7,000 to 2.888 million, according to the Labour Office.

Meanwhile, credit conditions for the German economy remain constrained, however they remain at a better condition than they were a year ago.

Credit constraints for German industry and trade increased by 1.3 percentage points in July.

According to the Ifo Institute bank lending practices were assessed as restrictive by 21.2 pct of the firms surveyed. This figure nevertheless remains lower than it was a year ago.

"In view of these figures, increased uncertainty cannot really be said to have impacted bank lending practices. Indeed, the financing conditions for German firms remain extremely favourable," says Hans-Werner Sinn, President of the Ifo Institute.
 
In manufacturing last month's trends continued. Large and medium companies' credit constraints increased by 1.1 and 1.8 points respectively.

However, fewer than 20% of the firms surveyed reported restrictive access to bank loans. Credit constraints for small firms fell by another 0.5 percentage points to 21.8 pct.
 
After increasing last month, credit constraints in construction fell by 0.8 percentage points to 26.7 pct.

The biggest upturn in the July survey was recorded in trade. 20.5 pct of the firms surveyed reported problems in the credit market, representing an increase of 2.5 percentage points.