Eurozone data were disappointing - BBH

Research Team at BBH, notes that the Eurozone data were disappointing today as the July unemployment rate did not improve and it remained at 10.1% for the fourth consecutive month. 

Key Quotes

“It finished last year at 10.5%.  The August CPI was also unchanged at 0.2%.  The market had expected a little improvement, but yesterday's softer German numbers make today's report somewhat less surprising.  The core rate was also softer at 0.8%, slipping from 0.9%. 

While many observers do not expect the ECB to ease policy next week, it cannot be happy with today's report.  It can only reinforce the concern expressed by the ECB over the lack of progress.  It is difficult to see how it does not extend its asset-buying program.  This, in turn, raises questions about the scarcity of some issues.  While Germany is the focus, it is not the only country where supply may become a more pressing issue. 

There were also a few national reports from Europe that are worth noting.  First, while German retail sales (July) were well above expectations, France disappointed.  German retail sales jumped 1.7%, more than threefold more than expected and the highest since June 2014.  French consumer spending fell 0.2% in July.  It is the fourth consecutive decline.   

On the other hand, French harmonized CPI rose 0.4% in August, which is also the increase over the past year.   Italian inflation was a bit better than expected at flat.  The year-over-year pace moved to zero from -0.2%.  It is the first non-negative reading since January. 

The euro posted a marginal new low for the move at $1.1130.  However, the range is about a third of a cent and appears to be waiting for US leadership.  The $1.1110-$1.1120 area is important from a technical perspective.  It houses the 200-day moving average and a 61.8% retracement of the euro's rally since late-July when it last dipped below $1.10.   The $1.1170-$1.1180 may cap upticks.”