The Euro advanced to its best level in two weeks against the US Dollar on Wednesday after data showed that the world’s largest economy contracted far more than previously expected in the first quarter of the year.
According to the US Commerce Department the USA’s gross domestic product contracted at an annual rate of 2.9%, well below the 1% reported last month. The decline marked the worst performance in five years.
The figure was also far worse than the previous estimate for growth of 0.1% and marks the biggest downward revision since records began in 1976. Economists had expected growth to be revised to show it contracting at a 1.7% rate.
Despite the sharp decline economists are confident that the US economy will rebound strongly in the second quarter of the year. Economists are forecasting for growth of 3.5% in the second quarter and 3.1% for the rest of the year.
Stuart Hoffman, chief economist at PNC Financial, said: “We have ample evidence that the first quarter was just a temporary setback for the economy, and we are climbing out of the hole in the current quarter.”
Data released earlier in the week supports signs for an economic recovery. Yesterday saw new home sales soar to a six-year high and consumer confidence climbed to its best level since 2008. Data released on Monday showed a better than expected rise in manufacturing output and existing home sales.
The Euro to US Dollar is currently trading around 1.3639
The US Dollar was also weakened by a separate report which showed that durable goods orders fell by -1% in May as demand for military equipment fell sharply. Economists had been expecting orders to edge higher by 0.2%.
Further declines for the ‘Greenback’ were restrained slightly by the release of a better than forecast Markit Services PMI report.
The Euro was continuing to receive support from a report released early in the session which showed that consumer confidence in German increased to a seven-and-a-half year high in June. The GfK consumer climate index rose to 8.9 from the 8.6 recorded in May.
Euro Exchange Rate News:
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,,US Dollar,1.3639 ,
Euro,,British Pound,0.8026 ,
Euro,,Australian Dollar,1.4540 ,
Euro,,Canadian Dollar,1.4618 ,