German July s.a. jobless numbers unexpectedly dropped 6K over the month. We had been looking for a rise of 45K and our median was 43K, but statistical changes helped to push the official number lower. According to the Labour Office, the jobless total would have risen by 30K from June without the changes. This is still a better figure than hoped for and Labour Office head Weise said the effect of the recession on German jobless numbers is “moderate” so far. Extended facilities for companies to reduce working hours are clearly helping to prevent mass scale job cuts, but this is a form of “labor hording” that can only ever be a temporary solution. If the recovery will be very shallow and drawn out, as many fear, then companies will eventually have to cut back on jobs.
At the same time, EUR/GBP losses extended to 0.8535 lows, which is close to mooted magnet stops at the 0.8530-35 area. The interest provided Cable with good support and the pair traded in to 1.6489 highs. European sources claim that Japanese interest emerged in either direction just ahead of the 1.6500 area, with one Japanese house reportedly lifting Cable on the back of month end equity rebalancing, while another name was a good seller on the back of option related interest ahead of today’s large 1.6500 expiries. EUR/GBP is expected to provide the impetus from here and a move in to 0.8515 could elevate Cable above 1.6500. Offers remain at 1.6520-30 and towards the mid-1.65s.
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