The euro’s value against the dollar fell on Thursday to its lowest in nearly two years pushed down by a slowdown in economic activity in Europe’s powerhouse Germany.
Activity for the whole euro area also declining faster than expected in May.
That shows the downturn that started in smaller periphery members is taking root in core countries -Germany and France.
As a result the euro fell sharply on Thursday. At one stage is was well below $1.26, its lowest level since July 2010.
Analyst Jeremy Gaudichon with Richelieu Finance explained why: “We can see that the euro is weak against the dollar because there is a real difference in growth between Europe and the US. The major concern around sovereign debt is, of course, in Europe.”
The euro has lost 1.6 percent against the dollar so far this week with sentiment already fragile after a European Union leaders summit on Wednesday failed to shed new light on how they might tackle the eurozone debt crisis.
Fears of a Greek exit from the euro have mounted after the inconclusive election this month left the country on the path to bankruptcy and raised the risk of its problems spreading to other eurozone countries.
Investors are now profoundly worried about what impact Greece leaving the euro would have on the region’s fragile banking system.