The home favourite came home in one minute and 56.66 seconds, just over a second clear of Goddard, who was 1.5s faster than Austria’s Markus Rogan in third.
France’s Amaury Leveaux was second, and Hungary’s Dominik Kozma third.
Britain’s Robbie Renwick came eighth in the final - with the London 2012 Olympics looming, Britain only sent a five-strong team to Hungary.
Michael Jamieson finished 12th in the semi final of the 200m breaststroke and Sophie Allen swam 2:13.29 to qualify fifth fastest for Thursday's 200m medley final, with sprint freestyler Craig Gibbons completing the squad.
The 17-year-old was almost 10 seconds clear of Hungary’s Kis Gergo, coming home in a time of 14:48.92.
Another Hungarian, Gergely Gyurta, was third.
German duo Britta Steffen (54.15) and Daniela Schreiber (54.41) were second and third.
There was more medal success for the Germans as
Jennie Johansson of Sweden was second 0.52s behind, with Spain’s Marina Garcia Urzainqui just behind in third.