Euro-Area GDP Contracts 2.5% In Q1

Release Explanation: It measures the monetary value of all goods and services produced within a Country's borders in a specific time period. GDP is calculated on an annual basis, is the broadest measure of activity, and the primary gauge of each economy's overall health. 'It includes all Company and Personal consumption, government outlays, investments, and exports less imports, that occur within a defined territory,' TheLFB-Forex.com Trade Team said.

TheLFB-Forex.Com Trade Desk Thoughts: The Euro-area GDP release showed that the economy contracted 2.5% in the first quarter. Q1 was the fourth consecutive quarter in which the economy contracted.

Compared with the first quarter of 2008, the Euro-area GDP fell by 4.6%. Taken individually, the biggest economies from the Euro-area declined at a record pace in the last quarter. Earlier in the day, a release showed that the German economy contracted 3.8% in the first quarter, the most on record. Except for Cyprus, the economy of each of the member countries that make up the Euro-area contracted in the first quarter.

The Flash release does not contain any breakdown of the GDP components, but TheLFB-Forex.com Trade Team estimates that the three major components (consumption, investment and trade balance) had a negative influence.

Among other things, the release paints a bleak picture for some of the Euro-area member states. For example Latvia's economy contracted 11.2 in Q1 from Q4 2008, and a whopping 18.6% from one year earlier.

Forex Technical Reaction: The euro rose 20 pips during the news release, despite the weaker than expected numbers. However, before the release, the euro lost 80 pips, declining the most among the major pairs against the dollar.

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