European Recession Avoided – EUR/USD Still Under Pressure

Germany’s strong growth in Q1 managed to pull the euro-zone from the brink of recession. The 17 nation currency bloc didn’t contract nor grow in Q1 2012.

Germany grew by 0.5%, far better than early expectations that stood on 0.1%. The French economy stalled, exactly as expected. Italy disappointed with a significant contraction: 0.8%. This was worse than 0.6% that was expected, and is the third consecutive negative quarter.

Spain already reported its contraction earlier, and is already in recession. Europe’s fourth largest economy is now struggling with a problematic banking sector, which sidelines the contracting economy and the huge unemployment rate of 24.4%.

In addition, to the GDP figure, the German ZEW Economic Sentiment disappointed after many positive months and fell from 19.1 to 10.8. ZEW explained the drop in sentiment on the Greek situation – the uncertainty regarding Greece’s membership in the euro-zone weighs on sentiment.

EUR/USD is at 1.2850, in the middle of the 1.2814 to 1.2873 range.

See more in the EUR/USD forecast.

The less important European wide ZEW Economic Sentiment also dropped to a lower abyss than expected: from +13.1 to -2.4, much worse than 11.7 that was expected.