"The German labor market remains robust and it benefits from the recent pick up in activity. The labor market is set to remain a supportive factor for consumption even if employment growth doesn't accelerate considerably near term."
- Annalisa Piazza, senior fixed-income strategist at Newedge Group
The shared currency was dragged down by disappointing figures from Spain, while another set of stronger-than-excepted data from Europe's powerhouse pushed it slightly higher.
Europe's fourth largest economy expanded mildly in the final three months of 2013, with economic output advancing only 0.2% from 0.3% in the third quarter, coming in line with analysts' expectations. On an annual basis the economy is still contracting, with the GDP dropping 0.2%, falling short of market's projections for a 0.1% decline. Despite disappointing figures, Spanish macro data is showing promising signs, boosting investors' confidence. Spain managed to sell bonds with lower yields at the beginning of February, with the average yields on a 3-year bonds with a coupon easing to 1.562% from 2.10% earlier. Looking ahead, the European Commission projects a 0.5% growth this year.
Germany continues showing optimistic signs, with the number of jobless people falling by 14,000 in January, even though the unemployment rate remained at 6.8%. These indicators alone can produce high market impact as they are considered to be a key sign of how the overall economy is performing, as household spending is highly correlated to the labour market conditions. Stronger growth, business confidence are all suggesting the economy will continue gaining momentum in the coming months.
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