Eurozone: Falling unemployment brings another interest rate hike from the ECB in February

Positive developments on the labor market front weighed on bond markets today as they “bring even closer” to a rate hike from ECB.

Eurozone unemployment fell to a record low in November, intensifying pressure on the European Central Bank to keep raising interest rates. In November, the number of unemployed in the Eurozone reached 10.8 million, i.e. 2,000 less than the previous month, which is also a record level since 1998, according to Eurostat statistics. The jobless rate was unchanged from October at 6.5%, the lowest since records began in 1995.

The eurozone labor market, according to analysts, is showing resilience in the face of the coming economic downturn due to high energy prices. These developments in the labor market, analysts estimate, further strengthen the view that the European Central Bank will be forced to continue raising interest rates as it battles the high inflation.

Markets are pricing in a 50 basis point interest rate hike at the European Central Bank’s Feb. 2 meeting. Rate hikes, which were negative a few months ago, lifted the key deposit rate to 2% in December.

In HDAT transactions of 116 million euros were recorded today, of which 42 million euros related to purchase orders.

The yield on the Greek 10-year bond stood at 4.49% from 4.45% that closed at the end of last week versus 2.25% for the corresponding German bond, bringing the spread to 2.24% from 2.15%

In the foreign exchange market, the euro strengthened against the dollar, as the European currency was trading at $1.0745 in the early afternoon from the $1.0644 level at which the market opened.

The indicative euro/dollar exchange rate announced by the European Central Bank stood at $1.0696.

RES-EMP

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