Euro falls sharply against the US dollar

The euro fell sharply against the US dollar on Friday, finishing the day at $1.3492.

• Much weaker-than-forecast first quarter GDP figures released in the eurozone on Friday reduced investor appetite for the single currency, as they opted instead for the perceived ‘safety’ of the greenback.
  
• Germany ’s export-led economy contracted by 3.8% in first three months of 2008, the largest fall since the country started recording quarterly data in 1970.
  
• Elsewhere, the Netherlands saw a 2.8% fall and Italy 2.4%, but the most dramatic decline was in Slovakia – the eurozone’s newest member – who recorded a staggering 11.2% fall in first quarter GDP. This reflected its dependence on car sales and exports to Germany.
  
• Overall, the 16-country region’s economy contracted by a much larger-than-expected 2.5% in the period, faster than the economic slowdown in the US, although analysts did say the figures may have been exaggerated by companies cutting production faster than demand fell, and running down inventories.
  
• Nevertheless, the figures induced a flight to the perceived safety of the greenback, as investors worried that the eurozone may have some way to go before its economic recovery begins.
  
• In trading so far today the single currency has resumed its slide against the US dollar as investors continue to digest Friday’s figures.
  
• At 16.30 BST today, the US Treasury’s Timothy Geithner is set to give a speech at a Newsweek Magazine Event. There are no major announcements in the eurozone today.