Euro falls against the US dollar after German GDP data

The euro strengthened against the US dollar yesterday, but has begun losing ground this morning following worse-than-expected GDP data from Germany.

• In early trading yesterday the euro weakened against the dollar as general risk aversion returned to the market. Surprisingly weak US retail sales data released on Wednesday evening, together with the Bank of England’s gloomy outlook for the UK’s economic recovery, dissuaded investors from buying into perceived riskier currencies generally, with the euro suffering as a result.
  
• However, the euro recovered ground in the afternoon following small gains on equity markets, to finish the day slightly up against the dollar.
  
• But the euro has slipped against the US dollar this morning after data showed Germany's gross domestic product fell by 3.8 percent in the first quarter, more than had been expected. The Wiesbaden-based Federal Statistical Office says it is the biggest drop since it began tracking quarter-to-quarter growth in 1970. Forecasts had been for a drop of 3.0 percent on the quarter, seasonally adjusted.
  
• The number of new jobless claims in the US rose to a seasonally adjusted 637,000, from a revised 605,000 the previous week, the Labor Department said. The figures released yesterday exceeded analysts' expectations of 610,000.
  
• Other data yesterday showed US wholesale prices climbed 0.3 percent last month, larger than the 0.1 percent gain economists had expected. The biggest jump in food costs in more than a year offset a second monthly decline in the price of energy products.
  
• There are no significant data releases due from the UK today, while in the US the Consumer Price Index, Empire Manufacturing, Net Long Term TIC Flows, Industrial Production and University of Michigan Consumer Confidence figures are released this afternoon.