Euro Drops on Expectations for Continued Contraction

Euro is headed lower again, thanks to more economic data that indicates the eurozone is likely to remain in an economic contraction. Even good news out of Germany can’t change the subdued economic outlook for the entire 17-nation currency region.

Once again, it appears that the eurozone economy is shrinking. The Centre for Economic Policy Research indicated that the economy for the 17-nation currency region shrank in February. On top of that, the numbers for fourth quarter 2012 GDP show a 0.6 per cent contraction. The eurozone remains in the grip of recession, and that is hard on the euro.

Right now, it appears that unemployment is a serious issue. While Germany has a low rate of unemployment, the story isn’t the same everywhere else. Many of the eurozone countries — particularly those on the periphery — have high unemployment rates. Getting people back to work is one of the priorities that some leaders cite as helpful to boost the economy in the 17-nation currency region.

For now, though, until some of these hurdles can be cleared, the euro is expected to struggle against its major counterparts.

At 14:16 GMT EUR/USD is down to 1.3119 from the open at 1.3140. EUR/GBP is down to 0.8645 from the open at 0.8668. EUR/JPY is also lower, down to 121.1875 from the open at 121.1850.

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