German GDP contracts 0.2% in second quarter, euro mixed

Germany`s economy contracted in the second quarter, indicating the Eurozone`s yearlong recovery lost momentum, and likely pressuring European Central Bank’s policy makers to come up with some new ideas for boosting growth.

The outlook is now clouded by the impact of international measures against Russia over its support of separatists in Ukraine. The euro-area recovery is already fragile, with inflation running at the slowest pace since 2009, and current ECB measures will take time to have an effect.

The Eurozone`s largest economy contracted 0.2 percent in the three months to June, Germany`s federal statistics office said today, while on annual basis, the economy expanded 1.2 percent. The weak recovery leaves the currency bloc lagging other advanced economies such as the U.S. and the UK.

The sluggishness is keeping unemployment high and inflation low, increasing pressure on the central bank to lower its outlook for economic growth and take more action to bring inflation closer to its 2% target from around 0.4% currently.

The euro was little changed on Monday, last seen trading at $1.31293 after opening at $1.31267. The EURUSD pair so far hit session high at $1.31301.