The Euro has weakened to a three-week low against the US Dollar due to Europe’s recession deepening in the final quarter of 2012.
The single currency has also dropped for a third day against the Japanese Yen as the disappointing Eurozone GDP data followed the release of weaker than expected data out of France and Germany, the region’s top two economies.
The deepening of the regions recession and the shrinkage of 0.6% to the Eurozone economy could spur a series of drops for the Euro as investors realise that the Euro crisis never went away. The decline marks the sharpest contraction since the height of the financial crisis in 2009.
“They’re pretty awful figures in Europe,” said Neil Mellor, a foreign-exchange strategist at Bank of New York Mellon Corp. in London. “It could get a lot worse because the Euro has risen a long way since the start of the fourth quarter.”
Carsten Brzeski from ING added to that saying: “These are horrible numbers; it’s a widespread contraction, which does not match this positive picture of stabilisation and positive contagion”
But he added “We still expect growth to return in the course of 2013 but any return of growth will be very small which means that the social impact of this recession, especially in the peripheral countries will be still a very severe one.”
Unemployment in Portugal reached its highest level since the creation of the single currency and joblessness is rampant in Spain and Greece. The Euro’s recent series of rises could also prove to be a burden to the smaller nations desperately struggling to improve their exports. Despite denials that it would seek to weaken the currency it is becoming clear that the European Central Banks policies are having little impact on the debt crisis.
Despite all of the talk that the worst is behind the region it will interesting to see how they explain the jobless level continuing to breach record highs. If anything those figures suggest that the worst of the crisis has yet to manifest itself, after all the Eurozone economy has now been contracting for three consecutive quarters, following zero growth in the first quarter of last year. That makes it the first full year in which no quarter produced growth, extending back to 1995.
Current Euro exchange rates
As of 11:30 am
The Euro to Pound Sterling exchange rate is currently trading in the region of 0.8591
The Euro to US Dollar exchange rate is currently trading in the region of 1.3327
The Euro to Australian Dollar exchange rate is currently trading in the region of 1.2889
The Euro to New Zealand Dollar exchange rate is currently trading in the region of 1.5727