Eurozone unemployment declined in November

Daniel Richards - MENA Economist
Published Date: 11 January 2022


  • Eurozone unemployment fell to 7.2% in November, down from 7.3% the previous month. This marks the lowest level since March 2020, when the Covid-19 pandemic first started to make a serious impact on the bloc’s economies, most notably Italy. Renewed high case loads (only in part due to the Omicron variant) seen through December, alongside some key economies such as Netherlands reintroducing restrictions on activity, could see the labour market recovery stall over the coming employment data prints. However, initial PMI surveys at least have so far painted a promising picture of labour market resilience in the bloc.
  • A blogpost published by the IMF yesterday cautioned emerging markets that they should be prepared to deal with any potential fallout from monetary tightening by the US Federal Reserve. The piece acknowledged that the current path of tightening was well signposted and impacts could be limited, but warned that more disorderly rate rises posed risks, especially to economies with ‘high public and private debt, foreign exchange exposures, and lower current-account balances.’
  • CPI inflation in Egypt rose to 5.9% y/y in December, compared to 5.6% the previous month. However, prices declined by -0.1% compared to the previous month, and given this, and the fact that the annual inflation rate remains well within the central bank’s target range, we anticipate that the overnight deposit rate will be left on hold at 8.25% at the first meeting of the year on February 3. All the same, with indications that developed market tightening will come sooner rather than later, we expect that the CBE will start to raise rates in the second quarter in order to maintain a robust interest rate differential.
  • Australian retail sales expanded 7.3% m/m in November, beating expectations of 3.6% and up from the previous month’s 4.9%. This was the fastest pace of expansion since May 2020, benefitting from a loosening of Covid-19 related restrictions. However, a renewed surge in cases in the interim period will likely have derailed this growth momentum.

Today’s Economic Data and Events

11:00 Turkey current account balance, November. Forecast: -2.50bn TRY               

Fixed Income

  • US Treasuries whipsawed overnight despite little fundamental market to push bonds one way or the other. The market is likely waiting on the release of US CPI numbers for December out later this week to provide the next impetus for a move higher. After an initial bounce at the start of trading, 2yr USTs sold off over the rest of the day with yields pushing above 0.9% and closing up more than 3bps at 0.8944%. The 10yr UST yields broke above 1.8% twice before moving back lower and ended the day essentially flat at 1.7603%.
  • Fed chair Jerome Powell will provide commentary at his reappointment confirmation at the Senate Banking Committee later today, noting in some preliminary remarks that the Fed would “prevent higher inflation from becoming entrenched.”
  • Emerging market bonds endured another tough day as markets gear toward a much more hawkish rate cycle from the Federal Reserve in the US. An index of USD-denominated emerging market bonds fell by 0.3%, falling to its lowest level since the height of the pandemic in Q2 2020. In local currency markets, 10yr Turkish government bonds slumped with yields up 40bps overnight to 23.43% while South African bonds sold off with yields up 10bps to 9.958% and Indian bonds lost ground as well as yields ticked up around 5bps to 6.588%.


  • As rates markets price in the prospect of the Fed raising rates as early as March the dollar remains bid against peers. The DXY index added 0.3% overnight to close at 95.991 with gains coming on the back of a similar sized drop in EURUSD, down to 1.1326, while GBPUSD also ticked lower, by around 0.1% to 1.3577. JPY managed to extend its recovery for a fourth day running with USDJPY down by 0.3% to 115.20. 
  • Commodity currencies were broadly weaker with CAD leading the pack lower. USDCAD added 0.28% to 1.2679 while AUDUSD fell 0.15% to 0.7170 and NZDUSD closed down by 0.25% at 0.6762.


  • Asian equity markets for the most part did not take their cue from Friday’s sell-off in the US, but rather started the week on the front foot. Although South Korea’s KOSPI lost -1.0% and Japan’s Nikkei closed basically flat, the Hang Seng added 1.1% and the Shanghai Composite 1.3%, while in India both the Sensex and the Nifty added 1.1% by the end of day.
  • There was marked volatility in US markets yesterday but losses were pared towards the end of the session, and in the end the NASDAQ managed to close up 0.1%. Nevertheless, the tech and growth stock heavy index has struggled so far this year as rate hikes start to come into focus. The S&P 500 closed down -0.1% and the Dow Jones -0.5%.
  • There were also losses in Europe, with the CAC dropping -1.4%, the DAX -1.1% and the FTSE 100 closed down -0.5%.


  • Oil prices fell a second day running as some of the supply constraints that helped to bid the market higher at the turn of the year appear to be easing. Brent futures fell more than 1% to close at USD 80.87/b while WTI fell around 0.9% to USD 78.23/b.
  • Production in Libya has reportedly restored to up to 1m b/d after militant attacks disrupted flows and output over the last few weeks. Elsewhere Iran’s foreign ministry pushed back on the chances of a temporary deal being agreed on the country’s nuclear programme and would look for uninterrupted ability to export crude oil.

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