German unemployment showed further signs of improvement as Europe’s largest economy was able to reduce the rolls by another -3K in March. This was slightly less than the -5K figure the market was expecting but continued the positive trend that has been in place for the past two months.

The gradual improvement in the German labor conditions has been the primary reason why sentiment readings from both the business and the consumer sector have remained relatively buoyant despite the recessionary background elsewhere on the continent. Indeed French consumer spending figures were woeful printing at -0.8% versus -.0.1% eyed.

It’s becoming increasingly doubtful if Germany alone can pull the Eurozone out of the recession, despite its impressive employment demand which should help to turn growth positive in Q1 of this year. With political situation in Italy still unclear as various parties have not begun negotiations, the markets remain wary and the EUR/USD sold off on the news after a dip in EZ equity indices revived risk aversion flows.

Still the pair remains above the 1.3100 level and has been able to maintain 1.3050 support for the past several days. If the political situation in Italy shows some prospect of resolution the pair could resume its relief rally as the economic data at least in Germany remains relatively suportive.

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