Euro fell further against the dollar to a new two-year low after euro zone unemployment data were released today. The unemployment rate in the euro region ticked up to 11 percent in April from March’s 10.9 percent. Although this was in line with expectations, based on the current conditions in the region and with deepening debt crisis, market participants are concerned that joblessness will increase.
Increased Spanish jobless numbers notably contributed to the rise, which came as a result of many companies laying off employees in an effort to lower costs in a time of eroding consumer confidence. The current Spanish banking crisis is causing government bond yields to soar to record highs, making it more costly for the government to borrow in the debt markets, and putting Spain at risk of needing an international bailout.
Meanwhile, political focus remained on fiscal difficulties as Greece prepares elections in two weeks, after the May 6 elections were inconclusive. European leaders are hoping the elections will usher in a government which will be able to commit to the terms of the bailout agreement between Greece and the EU/IMF. The elections last month failed to produce a stable government.
EURUSD fell to 1.2311 after the data, from 1.2333 just before the data at 09:00 GMT. This marks the lowest levels since 27 June 2010.