EUR/GBP extends recovery, nearing 0.8700 following upbeat Eurozone data

EUR/GBP hits 0.8690 following better-than-expected Eurozone data.
Eurozone unemployment declined unexpectedly while producer prices rose.
The Pound remains on its back foot following weak services activity figures.

Guillermo Alcala FXStreet

The Euro appreciates for the third consecutive day against a weaker British Pound on Thursday, approaching 0.8700, fuelled by upbeat Eurozone sentiment data and an unexpected decline in the region’s jobless rate.

Data released by Eurostat revealed that the Eurozone’s unemployment rate dropped to 6.3% in November, against market expectations of a steady 6.4% reading.

Beyond that, November's Producer Prices Index (PPI) accelerated to 0.5% from 0.1% in October, beyond the 0.2% expected by the market. Year-on-year, producer prices contracted at a 1.7% pace from -0.5% in October, but still at a slower pace than the -1.9% forecasted by market analysts.

Finally, most of the economic sentiment indicators released by the European Commission have beaten expectations. Consumer Confidence has risen to -13.1 in December from -14.6 in November, Business Climate improved to -0.56 from -0.66, and Industrial Sentiment ticked up to -9 from -9.3 in the previous month.

Earlier in the day, figures from Germany revealed an unexpected improvement in Factory Orders, which rose 5.6% in November, following a 1.6% increment in October, against the market consensus, which had anticipated a 1.0% decline.

The UK economic calendar is thin today, but the Pound remains on the defensive following a downward revision of the S&P Global Services PMI on Monday, which highlights weak economic growth in a context of hot inflationary pressures.

(This story was corrected on January 8 at 11:10 GMT to say that the EUR/GBP hit 0.8690, in the first bullet point, instead of EUR/USD as previously reported).

Economic Indicator

Unemployment Rate

The Unemployment Rate released by the Eurostat is the percentage of unemployed workers in the total civilian labor force. It is a leading indicator for the economy of the European Union. If the rate goes up, it indicates a lack of expansion within the European labor market and a weakening of the economy. Generally speaking, a decrease of the figure is seen as bullish for the Euro (EUR), while an increase is seen as bearish.

Economic Indicator

Producer Price Index (MoM)

The Producer Price Index (PPI) released by the Eurostat is an index that measures the change in prices received by domestic producers of commodities in all stages of processing (crude materials, intermediate materials, and finished goods). Generally, a high reading is seen positive (or bullish) for the EUR, while a low reading is seen as negative (or bearish).

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