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Euro Down As Eurozone Economy Contracts Sixth Straight Quarter

The euro weakened against most of its major rivals in early deals on Wednesday after a report showed that eurozone's economy contracted more than expected by economists in the first quarter of 2013, reviving chances for further monetary support from the European Central Bank.

Preliminary data from Eurostat showed today that the euro area gross domestic product fell 0.2 percent quarter-on-quarter in the first quarter, faster than the expected 0.1 percent contraction. This followed a 0.6 percent decline in the fourth quarter of 2012.

The economy shrank 1 percent on an annual basis. This was steeper than a 0.9 percent contraction recorded in the fourth quarter of last year.

The French economy slipped into recession in the first quarter of 2013, preliminary data from statistical office Insee showed. The gross domestic product declined 0.2 percent in the first quarter of 2013 following a 0.2 percent contraction in the fourth quarter of 2012, which is revised from the previous estimate of 0.3 percent fall.

The German economy expanded less than forecast in the first quarter of 2013, preliminary figures released by the Federal Statistical Office showed today.

The gross domestic product grew 0.1 percent quarter-on-quarter in the first quarter, after adjustment for price, seasonal and calendar variations. This was weaker than forecast for a 0.3 percent growth.

Meanwhile, the statistical office revised down the GDP figure for the fourth quarter of 2012 to show a contraction of 0.7 percent compared with an originally estimated 0.6 percent shrinkage.

Elsewhere, the U.K. claimant count declined by 7,300 in April from a month ago, data published by the Office for National Statistics showed today. Economists had forecast a decrease of 3,000 for April.

The number of people claiming jobseekers' allowances totaled 1.52 million. The claimant count rate fell slightly to 4.5 percent in April, while it was forecast to remain unchanged at 4.6 percent.

During January to March, the ILO unemployment rate was 7.8 percent of the economically active population, up 0.1 percentage points from October to December.

Confidence among Japanese consumers declined unexpectedly in April, results of a survey published by the Cabinet Office showed today.

The seasonally adjusted consumer confidence index fell marginally to 44.5 in April from 44.8 in March. Economists expected the index to rise to 45.5.

The index reflecting consumers' opinion on their overall livelihood fell to 42 from 43 in the previous month. The indicator of income growth edged down to 41.5 from 41.6 in March.

Switzerland's producer and import prices decreased less than expected in April, latest data showed today.

The producer and import price index edged down 0.1 percent on an annual basis in April, the Federal Statistical Office said. The rate of decline was slower than the 0.3 percent fall forecast by economists.

The import price index recorded a 1.5 percent decrease from a year earlier, while the producer price index moved up by 0.7 percent.

The euro dropped back to near the 1.2850 against the US dollar around 7:00 am ET, its weakest level since April 4. This was also down well-below yesterday's key 1.30 level and depreciating more than 1 percent from Tuesday's close of 1.2918. Further bearish extension could send the euro-buck pair re-testing the 1.29 support.

The common currency slipped to a 2-day low of 0.8439 against the pound, down 0.9 percent from yesterday's fresh 2-week high of 0.8516. The next likely support for the euro-pound pair is seen around the 0.84 level.

The single currency reached as low as 131.92 against the yen, just a few pips short of Asian session's low of 131.85 and down almost 0.3 percent from Tuesday's close of 132.29. If the euro-yen pair extends downtrend, 131.50 is seen as the next likely support level.

On the flip side, the euro traded in a positive territory against the Swiss franc due to across the board weakening of the latter. The euro advanced to nearly a 4-month high of 1.2524 against the Swiss franc at the beginning of the session and the pair has been swinging back and forth within a 40-pips range since then.

Looking ahead, traders will likely keep an eye on reports on U.S. producer price inflation, industrial production and homebuilder confidence for clues about whether the Fed would taper back its $85 billion quantitative easing program.

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