• The inflation rate of the euro area fell 1.9% in June 2021 (YoY) from 2.0% in the previous month of May. 
  • European stocks have seen an increase in funding YTD, with investors hopeful of recovery. 
  • US employment growth will be confirmed by the weekly continuous jobless claims set for release on July 1, 2021.

The EURUSD pair lost 0.34% on June 30, 2021, from the previous day’s close at 1.895. It declined from a high of 1.1910 to a low of 1.1845 after Germany’s unemployment rate for June 2021) stagnated at 5.9% (MoM). The number of those unemployed increased from 2.687 million in May 2021 to 3.614 million in June 2021. 

According to Destatis, approximately 44.5 million German residents were employed as of May 2021, indicating an increase of +0.1% from those employed in the previous month. 

Germany’s employed population rate

Germany’s employed population rate

However, the number is yet to reach pre-pandemic monthly levels, where it stood at +1.5% in January 2018 before declining to 0.4% in February 2020. Provisional estimates also indicate that Germany’s CPI in June 2021 may hit +2.3% with goods inflation at 3.1% (YoY). 

Consumer prices for May 2021 are also set to increase by 0.4%. Ahead of the final data release on July 15, 2021, the service sector will see a revival due to the reopening of retail businesses, including food establishments in Germany. 

Low inflation rate

The inflation rate of the euro area fell to 1.9% in June 2021 (YoY) from 2.0% in the previous month of May. The projection shows that energy is likely to have the highest annual rate increase at 12.5% in June 2021 (-0.6%) from May 2021 at 13.1%. 

Inflation projection in the euro area

Inflation projection in the euro area

May 2021 saw a 0.7% increase in industrial non-energy components that may be followed by a 1.2% increase in June 2021. The service sector will see a price decline to 0.7% from 1.1% realized in May 2021. 

With the recovery of the eurozone gaining steam, Wall Street is optimistic that European stocks will outpace US stocks. Investors have increased their flow of mutual funds into European stocks. 

Year-to-date (YTD) analysis showed that Europe’s Stoxx 600 Index inched up 13.49%, with the annual rate at +22.96%. Delayed reopening is attributed as an attractive venture with investors optimistic of growth into Q3 2021. 

US non-farm employment

US non-farm employment data for June beat estimates by 15.33% to settle at 692,000 in the private sector. Despite the positive move in the payroll report, it still represented a 21.90% decline from the previous record at 886,000 in April-May 2021.

The highest employment change number was seen in large US companies with 500 and more workers at +240,000. Mid-sized companies with 50-499 workers followed at +236,000. 

Only the information sector recorded a decline in employment numbers at -4,000 despite the service sector providing the highest employment opportunities at 624,000.  Employment in the small business sector (with 49 and below workers) attracted 215,000 additional jobs between May and June 2021. 

Ahead of the release of the weekly continuous jobless claims on July 1, 2021, it is expected that the unemployment numbers will decrease to 3.382 million. Employment numbers could increase in Q3 2021, with leading US health officials upbeat about the success of the Johnson & Johnson vaccine in combating the Delta Covid-19 variant. The single-shot dose is undergoing studies by the CDC to evaluate its efficacy levels against upcoming variants.  

Technical analysis

The EURUSD pair is moving below the 9-day EMA at 1.1919, suggesting it will continue the downtrend.

EUR/USD chart

While the 14-day RSI is in the oversold zone at 26.21, the low selling volume suggests that the price action may be preparing for a reversal. On the upside, it may hit a high of 1.1967 or proceed with the downtrend to 1.1820.