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German unemployment unexpectedly falls

Unemployment in the Eurozone’s biggest economy fell unexpectedly in January adding to the belief that Germany is on the right track to making a quick recovery.

According to the Nuremberg-based Federal Labour Agency, the number of people unemployed in the country fell to a seasonally adjusted figure of 2.92 million, a fall of 16,000 from the previous month. The decline took many economists by surprise with most predicting a rise of 8,000. The improving picture means that the overall jobless rate now stands at 6.8%, matching a 20-year low.

“Improving confidence is omnipresent,” said Thomas Gitzel, chief economist at VP Bank AG. ‘While companies are beginning to be more optimistic about the economic outlook, the return to job creation at a considerable scale will be long in coming, also because the orders situation hasn’t improved yet.”

The German National Bank the Bundesbank has also said that it is optimistic for a quick recovery. Last week it said that the economy appears to be recovering from its fourth-quarter decline and that confidence amongst German entrepreneurs and investors increased more than economists had been predicting in January. Activity in the service industries also saw an increase reaching a 19-month high.

The German labour market is in a good position,” said Anatoli Annenkov, an economist at Societe Generale. “Wages are fairly robust and inflation is coming down. Real income is growing and domestic demand may help the economy to expand again in the first quarter of this year.”

Some economists are saying that the Euro crisis is coming to an end whilst others are warning that such optimism is jumping the gun. Problems are still rife in the economies of several member states and with scandals emerging from Spain and Italy the single currency could be brought under pressure reversing its recent gains.

As the German Deputy Finance Minister warned; “The fire is under control, but we have to take care that it will not start again.”

As of 11:10 am

The Pound to Euro exchange rate is currently trading at 1.1650

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The Euro to US Dollar exchange rate is currently trading at 1.3552

The Euro to Pound exchange rate is currently trading at 0.8581