HomeEuro Area Unemployment Falls 0.1% to 7.9% in May

Euro Area Unemployment Falls 0.1% to 7.9% in May

The unemployment rate in the Euro area dropped to 7.9% in May. Improvements in the labour market supported the common currency as the inflation rate reached the ECB’s price stability level.

Today is the Non-Farm Payrolls (NFP) day in the United States, and for the entire week the headlines have centered around the US labour market. The Euro area labour market is improving further, as shown by the unemployment rate that declined in May.

Unemployment declined to 7.9% in May from 8%, and while this is a small improvement overall, the good news comes from youth unemployment. A major problem in the Euro area, youth unemployment declined as well in May, confirming the labour market recovery in all age groups.

The Euro pairs reacted to the release positively. As such, the EUR/USD pair bounced from its 1.1830 area lows to 1.1880 and the EUR/JPY regained the 132 level on the news. However, because of the NFP week, any move must be interpreted with a grain of salt until the US report is released.

Special ECB Meeting to Debate Inflation

Looking beyond the NFP report and its impact on the EUR/USD pair, one event stands out of the crowd next week, important for euro traders. A special ECB meeting has been scheduled next week, between the regular six-week meetings.

Rumors on the market are that this meeting is to debate inflation. More precisely, how will the ECB keep the accommodative measures in place, despite inflation running already close to or at 2%.

It is not clear if there will be a statement or not after the meeting. Rumours have it that the ECB members will convene next Tuesday evening for an official dinner and then discuss the matter at hand on Wednesday and maybe even on Thursday.

To be clear, this is highly unusual for the ECB. Some market participants expect that the ECB is ready to follow the Federal Reserve’s steps and shift its definition of price stability from 2% to a “symmetrical” target of 2%.

In other words, the ECB might be willing to let inflation overshoot 2% and announce a band or a range centered around the 2% mark. If that is the case, the Euro pairs are guaranteed to be volatile next week.

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