NEWS / Foreign Exchange

German Unemployment Rate Falls to New Multi-Year Low

- The European indices are currently trading in positive territory in the session, rising for the first time in four days.

- European government bonds are currently trading lower in the session and have remained in a tight range. The EGB??™s opened lower after the Fed??™s Bernanke indicated yesterday that the FOMC had not shifted away from its inflation bias, hence reducing hopes for a fed cut within the coming months. Gilts are also trading lower in the UK, and were unaffected by the final M4 money supply figures released today. In new supply Italy sold ?‚¬3B in 3-year 4% bonds with an average yield of 3.98% and a bid-to-cover of 1.53, ?‚¬2.0B 7-Year floating rate notes with a bid-to-cover of 1.85, and ?‚¬2.5B in 10-year 4.0% bonds with an average yield of 4.22% and a bid-to-cover of 1.44 overnight.

- The German ILO unemployment rate fell to 6.9% in February from 7.4% in January, its lowest rate since records began in January of 2004. According to the ILO German employment grew by 40K to 39.346M.

- Further on the unemployment front in Germany, the unemployment rate fell to 9.2% in March from 9.3% in February, its lowest level since May of 2001. The unemployment change was ??“65K, compared to estimates of ??“46K.

- Italian PPI came in at 0.4% m/m for February, ahead of the 0.3% estimate; PPI also exceeded y/y estimates of 3.8%, reaching the 4.0% level.

- The final reading on M4 money supply in the UK was unchanged from the preliminary reading m/m, however the y/y reading was revised down to 12.7% from 12.8%. Additionally, mortgage approvals were 119K, above estimates of 117K.

- NIER, the Swedish think tank, forecasted Swedish GDP growth of 3.9% in 2007, CPI of 1.2%, unemployment of 4.8% and wage growth of 4.1%. Furthermore NIER expects Riksbank to raise interest rates to 3.50% in 2007, and 4.00% in 2008; Riksbank??™s key interest rate is currently at 3.25%.

- The ECB??™s Gaspari said overnight that he would be surprised if ECB rates reach 4.25% by the end of 2007. Gaspari said that the ECB is flexible, and will raise rates if necessary, noting that rate action is dependent upon GDP, wage developments, oil prices, and fiscal matters. Gaspari said that, in his view, the situation in the US economy has worsened.

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