Falling Exports: Bad Sign For Euro-Zone GDP

The euro traded steadily at $1.31 on Wednesday morning as investors awaited US Federal Reserve Chairman Ben Bernanke's testimony before congress.

Dollar Cautious
Last week, Bernanke's remarks that the Fed was planning to continue its $85 billion per month stimulus plan into 2014 sent the dollar tumbling. Now, although no surprises are expected from the testimony, investors are cautious about the dollar ahead of Bernanke's report.

In the euro zone, data suggested the region has had yet another quarter of recession as both imports and exports fell in May. The Wall Street Journal reported that euro-zone exports fell 2.3 percent and imports slipped 2.2 percent. The figures marked the second consecutive month of sharp drops in exports and the largest month to month change since June 2011.

Huge Jump
The data also showed a trade surplus of 15.2 euros in May, a huge jump from last year's figure of 6.6 billion euros. However, the surplus is the result of a six-percent drop in imports rather than increasing exports, which indicates weak domestic demand.

Although some analysts have predicted that the euro zone would see a gradual recovery over the course of 2013 and could eventually turn to growth in 2014, the predictions are largely dependent on the state of the rest of the world's economies as well. At the moment, the global economy is struggling to pick up, which is reducing the market for euro-zone goods. Without a demand for its exports, the euro zone will find it difficult to pull out of the ongoing recession.

Waiting On The ECB
The data has many looking to the European Central Bank's next policy meeting and wondering if the bank will cut interest rates from 0.5 percent to .25 percent.

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