Euro-zone GDP declined 0.6% in the last quarter of 2012,
quarter on quarter, or 2.3% annualized. This was the third
consecutive quarterly decline and the fastest rate of decline
since the height of financial crisis in 2009.
Increasing unemployment and fiscal tightening are already
impacting domestic consumption in the region. Further, rising
Euro has made European exports expensive hurting their
Last month, the IMF revised downwards its estimate for
Euro-zone GDP to a contraction of 0.2% for 2013 from its earlier
estimate of an expansion of 0.2%.
The situation in the Euro-zone has somewhat stabilized since
European Central Bank's pledge last year to do "whatever it
takes" to preserve the union. As a result of renewed confidence,
the Euro has appreciated significantly in the last six months-up
9.13% against the U.S. Dollar.
While French President has called for establishing an exchange
rate policy, the German policy makers are against any exchange
rate intervention. Not surprising since German companies have
more flexibility to raise prices (due to composition of German
exports) as well as to reduce costs (agreements with labor
According to Deutsche Bank
, German exports can remain competitive with Euro at $1.79, while
French and Italian exports suffer at $1.24 and at $1.17
Do you think that Euro's strength will further hurt
Euro-zone's chances of rebounding anytime soon?
PRO-ULS EURO (EUO): ETF Research Reports
CRYSHS-EURO TR (FXE): ETF Research Reports
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