GBP EUR Drops with Lower German Unemployment

GBP EUR Drops with Lower German Unemployment

The GBP EUR exchange rate dropped as the euro was supported by German employment figures. The latest release showed German jobs were now at pre-virus levels as the recovery picks up in Europe’s most important economy. There was also talk of an ECB taper from one of the bank’s policymakers.

The GBP to EUR trades is testing the lows at 1.1650 once more.

German economy gets a jobs boost

Germany’s unemployment rate fell to 5.5 percent in August to reach its lowest level since the start of the pandemic, according to official statistics on Tuesday. But the country may also struggle with gaps in skilled labour down the line.

Seasonally adjusted figures for the economy showed the number of unemployed had dropped by 53,000 for the month, the BA federal labour agency said.

The August reading is the lowest since March 2020, when unemployment was at a record-low five percent before coronavirus shutdowns and mass furlough schemes destroyed the economy.

“Unemployment and under-employment have fallen sharply again, even though we’re still in the summer holiday period,” said BA head Detlef Scheele.

“Employment growth is gaining momentum.”

The unemployment rate for July was also revised lower from 5.7 percent to 5.6 percent. The country’s economy has largely reopened since restrictions were lifted in May, prompting a surge in hiring and activity.

However, experts say the jobs rally has exposed the familiar obstacle of skilled worker shortages in Germany.

“We need 400,000 immigrants a year” to meet the demands of the labour market, Scheele said.

ECB policymaker talks tapering of stimulus

The euro was boosted by a rare bout of tapering talk from one of its policymakers, Robert Holzmann.

“We are now in a situation where we can think about how to reduce the pandemic special programs. I think that’s an assessment we share,” Holzmann said.

“At our September meeting, we have the opportunity to discuss how do we close the pandemic part and focus on the inflation part,” he added.

Holzmann also said that the slowdown of the emergency PEPP purchase pace in the fourth quarter was “definitely” a discussion to take place at the central bank’s meeting next week. He also wants the ECB to “disentangle” guidance on asset purchases from the path of future interest rate rises.

Holzmann argued that the PEPP was a pandemic support issue but should be removed from the equation as the bloc gets back on the growth path and has to deal with the inflation issue.

The comments are the first from an ECB governing policy member in recent times that has been willing to discuss a potential tapering. They also may be premature after the US Federal Reserve struck a more dovish tone in the last week.

The ECB member closed his comments with remarks on the supply chain issues stalking developed nations, saying:

“The supply problem is something that occupies us all. But it’s something that will fade. This reduces some of the production but it doesn’t derail it”