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Eurozone GDP Raises Red Flags For The Region

Laura Brodbeck

The euro was steady above $1.37 to finish off the week.

The common currency traded at $1.371 at 6:30 GMT on Friday morning after eurozone GDP figures came in worse than expected on Thursday.

Data out on Thursday showed that economic activity within the bloc rose only slightly in the first quarter, indicating that the region has not completely shaken its financial crisis just yet.

The Wall Street Journal reported that the region’s first quarter GDP increased at an annualized pace of 0.8 percent.

The figure was well below analysts’ expectations and will likely increase the pressure on the European Central Bank to implement new stimulus measures in the near term.

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GDP figures for individual eurozone nations were also concerning as they highlighted the uneven nature of the bloc’s recovery. Germany’s economic activity rose by 3.3 percent in annualized terms, proving that the region’s largest economy continued to thrive.

However the eurozone’s second and third largest economies, France and Italy, both posted disappointing figures. While France was able to eke out modest growth, Italy’s economy contracted in the first quarter.

In a separate report, Eurostat confirmed that the region’s inflation rose to 0.7 percent in April from 0.5 percent in March. The figure is well below the ECB’s two percent goal and in what the bank has called “the danger zone," below one percent.

Many believe that the euro’s recent strength has kept prices from rising, but the ECB said it doesn’t see the price pressure escalating to outright deflation.

Most are expecting to see the bank use unconventional policy tools to fight the region’s falling inflation at June’s meeting.

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