Euro (EUR) Exchange Rate falls against Pound (GBP) and US Dollar (USD) as Euro Crisis threatens to return

The Euro tumbled against the Pound and declined to a two-and-half month low against the US Dollar following the publication of terrible GDP data.

The data showed that several Eurozone economies contracted in the first quarter of the year and the regions overall GDP figure expanded below expectations as the much vaunted recovery stalled.

The poor data will put renewed pressure onto the European Central Bank to take action at next month’s monetary policy meeting.

Positive GDP data for Germany was overshadowed by a number of GDP reports for other Eurozone members coming in well below forecasts.

France, the Eurozone’s second largest economy saw its economy stagnate in the first quarter of the year, disappointing economists who had been calling for a rise of 0.2%. The cause for the decline was a result of a 0.5% drop in consumer spending.

Italy’s economy unexpectedly contracted in the first quarter and raises the risk of the nation sliding back into recession. GDP fell 0.1%, below expectations for a rise of 0.2%.

“Italy GDP surprised on the downside. Italian activity continues to contract and the already ample output gap keeps widening,” said Annalise Piazza from Newedge Group in London.

Portugal saw a contraction of 0.7%, Austria grew by just 0.3% and Finland slipped into recession after its economy contracted by 0.4%.

The worst performer was the Netherlands which saw its economy contract by a shocking 1.4%. The figure was much worse than forecasts for a figure of 0.0%. The Netherlands Statistics Office blamed lower gas consumption and a slowdown on food and beer sales.

Quarter-on-quarter Eurozone GDP growth increased by 0.2%, below forecasts for a figure of 0.4%. Year-on-year growth of 0.9% was also below expectations for a figure of 1.0%.

Expectations that the ECB will introduce easing next month received further support after ECB Vice President Vitor Constancio told the Wall Street Journal that the Central Bank was open to introducing more monetary easing measures.

Ominously an economist tweeted; “The Eurocrisis is over…Long live the Eurocrisis,”

Euro Exchange Rate Update – 16/04/15

The Euro weakened further against the Pound on Friday after a report on new car sales across the Eurozone came in below forecasts and concerns mounted that next week’s European elections could create political uncertainty in the region.

Car sales increased by 7.4% from the previous year but sales in Germany were less than forecast. The rate in the rise of sales was the slowest recorded in five months.

According to the industry body ACEA car sales ranged from the 2.9% rise recorded in Germany to 3.7% in France, 5% in Italy and 12.5% in the UK. Spain led the way with 16.2% thanks to the introduction of a government car scrappage scheme.

Despite the rises they were below forecasts and raised concerns that the car sectors recovery is slowing down.

Sentiment towards the Euro also remains muted due to worries that next week’s European elections could create political uncertainty in the region and could trigger a new phase of the Euro crisis. Euroscpetic groups are expected to do well in the vote at the expense of the established parties.

“The nature of democracy means that politicians seek to be popular. The implication is that momentum towards structural reform in Europe could be lost as general elections near. This is turn could dull the attraction of peripheral assets. The crisis may yet come back to bite us,” said an economist from Rabobank.

Euro Exchange Rates