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EUR/USD traded at $1.3155, representing a drop of 0.2%, as Chinese GDP grew at a slower-than-expected pace of 8.1% in the first quarter, from an 8.9% growth rate in the last quarter of 2012.
The growth rate also fell short of forecasts of 8.3%. The shared currency declined further after data showed that the Spanish banks’ borrowing from the ECB climbed to €227 billion in March. German CPI data released earlier today showed the rate of inflation for March rising 2.1% in line with consensus estimates. That follows a 2.3% increase in the previous month. EUR/USD pared some of its losses as investors await the US CPI data. The year-on-year US CPI for February is forecast to fall back to 2.7% from 2.9%.
An increase in the CPI beyond the forecasted 2.7% will dampen expectations of additional quantitative easing. However, a lower number will spark a bearish reaction in the dollar, particularly after Bernanke’s cautious outlook on the US economy.