The euro surged just over 1 percent against the US dollar on Tuesday, but this was due primarily to broad weakness in the greenback. Indeed, the euro was mixed against the rest of the majors, as it fell against the British pound and Australian dollar and gained versus the Canadian dollar, New Zealand dollar, and Japanese yen. German economic data was generally weaker than expected, as the Federal Statistics Office said that the German trade surplus narrowed to 9.4 billion euros in April from 11.3 billion euros as exports plunged 4.8 percent. That said, imports fell by the most in five months at a rate of -5.8 percent, indicating that domestic demand is actually falling faster than foreign demand. This dynamic has taken a hefty toll on industrial production, as the Economic Ministry said that output surprisingly fell 1.9 percent in April, dragging the annual rate down to a new record low of -21.6 percent. Ultimately, the combination of weakening demand and output doesn’t bode well for growth in Q2, as data is likely to eventually show that GDP contracted for the fourth straight quarter.
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