Eurozone Unemployment Rate Holds Steady at 6.4% in August

Eurozone Unemployment Figures Keep Rate Cut Speculation Alive

On Wednesday, October 2, unemployment figures for the Eurozone may fuel speculation about an October ECB rate cut.

The Eurozone’s unemployment rate remained steady at 6.4% in August, aligned with forecasts. According to Eurostat,

• The number of people unemployed fell by 94 thousand after declining by 114 thousand in July.
• Compared with August 2023, the number of unemployed fell by 233 thousand, improving from a 190 thousand drop in July.
• Spain remained at the top of the unemployment chart, with an unemployment rate of 11.3% in August, down from 11.5% in July.
• Notably, France had an unemployment rate of 7.5% in August (July: 7.5%), while Germany’s unemployment rate stood at 3.5% (July: 3.5%).
• Malta had the lowest unemployment rate among the Euro area nations, standing at 3.0%.

Eurozone Unemployment and the ECB Rate Path

The Eurozone’s August unemployment rate may continue supporting investor bets on an October ECB rate cut. September’s softer inflation numbers for France, Germany, and the Eurozone have intensified speculation about a 25-basis point ECB rate cut.

Following Tuesday’s softer-than-expected Eurozone inflation figures and August’s steady unemployment rate, investors should monitor ECB commentary. ECB Chief Economist Philip Lane is on the economic calendar to speak today. Traders should consider his comments regarding the inflation drop below the ECB’s 2% target, labor market conditions, and views on an October rate cut.

EUR/USD Reaction to Eurozone Inflation

Before the unemployment report, the EUR/USD fell to a low of $1.10537 before climbing to a high of $1.10826.

However, following the unemployment report, the EUR/USD dropped slightly from $1.10720 to a low of $1.10634.

On Wednesday, October 2, the EUR/USD was down 0.01% to $1.10669.

Up Next

Later in the Wednesday session, US ADP employment change figures will also require consideration.

Economists expect the ADP to report a 120k increase in employment in September, following a 99k rise in August. Softer-than-expected numbers could refuel bets on a 50-basis point November Fed rate cut, possibly driving EUR/USD demand. Conversely, a higher-than-expected number could further test bets on a 50-basis point Fed rate cut.

Beyond the numbers, traders should also FOMC member speeches track FOMC member speeches. FOMC members Hammack, Musalem, Bowman, and Barkin are on the calendar to speak. Insights into the Fed’s interest rate trajectory will likely influence demand for the EUR/USD pair.