The euro declined to a fresh 8-month low against the dollar on Thursday, breaking below the 1.3586 post-U.S. jobs data low made last week after the release of fourth-quarter GDP data for Germany and the eurozone, which came in below the economists' predictions and cast doubts over the pace of the economic recovery in Europe. German preliminary GDP was unchanged quarter-on-quarter and fell by 2.4% on an annualised basis, with analysts expecting a quarterly growth of 0.2% and -2.2% for the year. The flash estimate for the eurozone GDP showed a small rise of 0.1% and -2.1% year-on-year, compared to the consensus forecast of 0.2% and -2.0% respectively.

In addition, industrial production in the eurozone fell by much more than expected in December, with a decline of 5% year-on-year after a revised 6.9% drop (from -7.1%) in the previous month. The weak data, coming after yesterday's ECB monthly report in which the central bank considered interest rates to be at an appropriate level, highlights the possibility that the climb out of recession for Europe will be slow and even, and that the withdrawal of fiscal stimulus will be pushed further down the horizon, especially with nations such as Greece, Spain and Portugal suffering from fiscal debt problems.

Euro may see its fifth consecutive lower weekly close against the dollar and could depreciate further to 1.3300 later this month. The single currency has been falling steadily since November 2009 when it hit a 15-month high at 1.5145.


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