Recession fears are back for the eurozone, and that is weighing on the euro today. Worries about recession, as well as speculation that a rate cut could be coming from the European Central Bank, are sending the 17-nation currency lower today.
Forex traders were surprised today as the information about GDP from the fourth quarter of 2012 was released for the eurozone. Expectations were for a contraction of 0.4 per cent, but, instead, the contraction ended up being 0.6 per cent from the previous quarter. This situation increased recession fears for the eurozone, and the euro has dropped.
Also weighing on the euro is the idea that the ECB might cut rates in light of this unexpected contraction. A lower benchmark might help stimulate the economy, and eurozone recession fears might mean lower rates from the ECB and from individual countries — even with recent assurances from various regions that currency war will be avoided. Rate cuts would weaken the euro further.
For now, there is a general feeling of risk aversion stemming from this surprising news, and high beta currencies are heading lower, led by the euro.
At 15:25 GMT EUR/USD is down to 1.3327 from the open at 1.3453. EUR/GBP is down to 0.8604 from the open at 0.6855. EUR/JPY is down to 123.9530 from the open at 125.6350.
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