Investing.com - The euro remained lower against the dollar on Monday as a shock contraction in Japanese third quarter growth weighed and Germany’s central bank warned that economic growth will remain weak in the coming months.
EUR/USD was down 0.23% to 1.2498, off the highs of 1.2576 struck overnight.
Market sentiment was hit after data showed that Japan’s economy contracted by an annualized 1.6% in the third quarter, following a 7.3% drop in the preceding quarter.
Economists had forecast growth of 2.3%.
The unexpectedly weak data added to gloom over the outlook for the global economy.
Japanese Prime Minister Shinzo Abe was expected to postpone a planned sales tax increase due to come into effect next year after a sales tax hike in April of this year acted as a drag on growth.
The prime minister was also expected to call for snap elections which could take place as soon as next month.
In the euro zone, Germany’s Bundesbank warned in its monthly report on Monday that the outlook for growth in the region’s largest economy was likely to remain weak in the next few months.
“The further deterioration in economic expectations and the stagnation of new orders point to a rather sluggish course of economic development in Germany until at least the end of 2014”, the Bundesbank said.
“No marked recovery in important euro-area partner countries has yet materialized,” it added.
The report also argued that the European Central Bank should not embark on a larger stimulus program, saying it would not be constructive.
Earlier Monday, data showed that euro zone exports jumped 9% on a year-over-year basis in September, boosting the trade surplus to €17.7 billion, from €15.4 in August. The surge in exports boosted the outlook for third quarter growth.
The euro was lower against the yen, with EUR/JPY down 0.30% to 145.21, off the six-year highs of 146.51 struck following the release of Japan’s GDP data.
Elsewhere, the Swiss franc was close to 26-month highs against the euro on Friday, with EUR/CHF trading at 1.2011, not far from the Swiss National Bank’s exchange rate cap of 1.20 per euro.
The Swiss franc has strengthened against the euro in recent sessions ahead of a vote later this month which could force the central bank to increase its gold reserves, a move which could restrict its ability to cap the value of the franc against the euro.