The GDP numbers were preliminary and therefore the composition of the figures was not yet available, but the headline data suggests that domestic spending must have been weaker than forecast as the region's credit crisis had a negative impact on consumer sentiment.
The EUR/USD dropped lower by 50 points in the aftermath of the release as the disappointing German data only added to the anxiety surrounding today's summit between French President Nicolas Sarkozy and German Chancellor Angela Merkel. The market is looking for Ms. Merkel to offer greater support for an expansion of the EFSF and ultimately to perhaps even back the idea of a common Eurobond.
Today's weak economic data may make it even more politically difficult for Ms. Merkel to commit German resources for the common good of Europe. Nevertheless, the two leaders clearly realize that a more unified approach is necessary in order to combat the assault of the shorts on the regions various credit markets and if today's meeting culminates in some sort of announcement that hints at a move towards more fiscal unification the EUR/USD could recover its losses