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Forex: EUR/USD pressured after record EMU unemployment rate

FXstreet.com (Barcelona) - The unemployment rate in the Eurozone came in at 12.0% in February, while the January figure was revised higher from 11.9% to 12.0%. After the publication, the EUR/USD eased back to its daily lows at 1.2830 and it is now extending the drop further, at 1.2825, as of writing. Earlier, the market saw the final reading of the March manufacturing PMI by Markit.

The German manufacturing PMI came in slightly higher than expected, at 49.0 from 50.3 (consensus at 48.9). It still doesn’t hide the fact that manufacturing turned contractionary in March. The EMU figure eased from 47.9 to 46.8 (consensus of 46.6). The Italian manufacturing PMI eased from 50.8 to 48.3 (consensus at 50.2). The French number had a slight upward move, from 43.9 to 44.0, but still contractionary. The Spanish figure fell from 46.8 to 44.2 (consensus at 46.0). Investors will be awaiting the German CPI report at 12:00 GMT.

In regard to the EMU unemployment rate at 12.0%, the highest rate ever in the Euro, “the upshot of this is that wage pressures on inflation will remain very subdued in most of the Eurozone, allowing the ECB to pursue further steps to ease monetary policy. However, we doubt whether all ECB governors agree that the time is ripe to take fresh monetary action”, wrote Martin van Vliet, analyst at ING Bank. “So while we cannot fully rule out a surprise rate cut or new unconventional support on Thursday, the most likely scenario is for the ECB to keep rates on hold and for Draghi to reaffirm that monetary policy will remain accommodative “as long as needed””, he added.

“As expected, the rally from 1.2770 peaked below 1.2890 resistance area and my outlook here is already bearish, for a slide through 1.2840. en route to 1.2750 and 1.2650 later on”, wrote Deltastock.com analyst Stoyan Mihaylov, pointing to initial resistance at 1.2890, followed by 1.2950.

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