The Eurozone single currency declined against all other major currencies today after the news went out that the economy of Germany contracted at a fastest pace in decades last quarter.
In the first quarter of 2009 German GDP — the highest in Eurozone and the worlds 4th highest — declined at a seasonally adjusted rate of 3.8 percent compared to Q4 2008; this decline followed 2.2 percent decline during previous quarter. Yearly drop of German GDP is now at 6.9 percent. This was the first such large quarterly decline since at least 1970 when the quarterly statistics became available. Market participants expected only 3 percent drop from the report.
The euro weakened significantly against the dollar and the Japanese yen and only slightly against the British pound, which is connected to European economy. The contraction of the German GDP also spurred decline of the high-yielding currencies against the low-yielding as the expectations of the risk-aversion increased.
On the brighter side for euro, the economy of France a slightly better than expected Q1 2009 change. French GDP fell by 1.2 percent instead of 1.3 percent expected and slower than 1.5 percent in Q4 2008. Despite that the yearly change is still frightening — 3.2 percent decline. Currency analysts believe that the traders will pay a high level of attention to these reports and that will definitely hurt the euro and probably other high-yielders.
EUR/USD went down from 1.3633 to 1.3578 as of 9:44 GMT today. EUR/JPY fell from 130.82 to 129.19, while EUR/GBP declined from 0.8956 to 0.8931 today.
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