Morning Forex Fundamental: EUR

Morning Forex Fundamental: EUR

'The return to modest rates of economic growth in the euro zone as a whole won't address the deep-seated economic and fiscal problems of the peripheral countries' - Researchers at Capital Economics

The Eurozone has finally emerged from its longest-ever recession after contracting for 18 months, however a resolution to region's twin banking and fiscal crises remains a distant prospect. On Wednesday the EU's statistical office Eurostat said the combined gross domestic product of the area that has Euro in circulation, expanded 0.3% in the second quarter, up from a 0.3% contraction in the first quarter, with its two biggest countries both revealing surprising strength. This is also moderately better than the 0.2% expansion anticipated by market participants, mostly due to the solid performance of Germany and France, which expanded 0.7% and 0.5% respectively. Among other countries, Portugal boasted a rapid rise of 1.1%, while Spain, Italy and the Netherlands all shrank, with their GDP contracting 0.1%, 0.2% and 0.2%, respectively.

However, upbeat data masks the mixed economic fortunes among all countries in the Eurozone, as several big economies are still experiencing a severe contraction. Soon after the report European Commission Vice-President Olli Rehn pointed out that the overall economy is gradually gaining momentum, however there is no room for complacency. Latest data mean that the scope and the form of the austerity drive in Europe is now changing, as policymakers across the region are emphasizing that any action must not choke growth and should be aimed at creation of new working places.