EUR/USD distanced from earlier highs after German unemployment report

The euro came off earlier highs against the US dollar on Tuesday, as German unemployment report disappointed market expectations and boosted concerns that economic activity might have reached its peak in the mid-summer period.

Having touched a session high at 1.3587 at 6:50 GMT, EUR/USD cross fell to 1.3534 at 11:10 GMT. Support was likely to be found at September 30th low, 1.3476, while resistance was to be encountered at January 31st high, 1.3618.

Earlier today it became clear that the number of unemployed people in Germany rose unexpectedly in September. According to seasonally adjusted data, the total number of unemployed in the country increased by 25 000, while in August this number was revised up to 9 000 from 7 000 previously. Experts had expected a decrease by 5 000. At the same time, the unemployment rate in Germany rose unexpectedly to 6.9% in September from 6.8% a month ago. Some analysts had warned of a potentially weaker results in September. Others, however, suggested that despite these disappointing data points, they did not see signs that German labor market will face a potential decline, because some of the comprising components of the index implied that employers willingness of hiring new employees has increased during recent months.

Italian unemployment rate also registered an advance, reaching 12.2% in the month of August, from 12.1% in July.

On the other hand, the rate of unemployment in the Euro zone as a whole decreased for the third consecutive month in August, suggesting that economic recovery in the region was probably gaining momentum. The number of unemployed people has registered a slight decrease to 19.178 million in August from 19.183 million in July, but that did not manage to considerably lower the rate of unemployment, as the latter remained at 12.0%. Initially the unemployment rate during July was reported at 12.1%, before revised down to 12.0%. Experts had anticipated that the unemployment rate in the bloc will remain at 12.1%.

Additionally, the index, gauging manufacturing activity in the Euro zone, rose for the third consecutive month in September, as the index has gained momentum in all EZ members with the exception of Greece and France. According to data by Markit Economics, the final value of the manufacturing PMI reached 51.1 in September, as this coincided with the initially estimated value. This result remained slightly below the highest point in 26 months, registered in late August, when the index stood at 51.4. Values above the key level of 50.0 are usually an indication that activity in the sector has expanded. In Netherlands the index advanced to 55.8 in September, marking a 29-month peak, while in Germany the PMI slipped to a two-month low at 51.1 during the same month. This data may have a positive impact upon both Euro zone and global economy, according to Markit, as even manufacturers in the peripheral areas of the bloc faced increased demand for their goods.

Meanwhile, the euro was losing against the pound, with EUR/GBP cross decreasing 0.13% on a daily basis to trade at 0.8348 at 12:54 GMT. The manufacturing PMI for the United Kingdom remained in the zone of expansion for a third month in a row, reaching a reading of 56.7 in September from 57.1 in August. EUR/JPY pair was losing 0.12% to trade at 132.83 at 13:00 GMT.