Currencies

Thursday May 15, 12:43 PM
Forex - Euro steady after euro zone data

LONDON (Thomson Financial) - The euro remained steady, but just off earlier highs, against the U.S. dollar after inflation in the 15-nation single currency zone came in as expected and growth was in line with the more optimistic forecasts garnered by strong German economic news.

Early in the morning, the euro surged nearly a cent against the U.S. dollar after official figures showed that Germany, the single currency zone's largest economy, grew by a staggering 1.5 percent in the first three months of the year, more than double the 0.7 percent expected, primarily because the warm weather helped boost construction output.

The German news ratcheted up market expectations about euro zone growth figures expected later from the 0.5 percent mark to around 0.7 percent.

When euro zone growth came in at 0.7 percent and CPI (NYSE: CPY - news) inflation for the year to April was confirmed at 3.3 percent, traders took the opportunity to book some profits, even though the data cemented market expectations that the European Central Bank will be in no hurry to cut its key refi rate from the current 4.00 percent soon.

'The latest activity data will provide ammunition for the hawks on the ECB's governing council,' said Jennifer McKeown, European economist at Capital Economics.

'And with inflation at a high rate, interest rate cuts are probably some months away,' she added.

The main focus Thursday will be on testimony from ECB president Jean-Claude Trichet followed by fellow rate-setter Yves Mersch.

The state of the U.S. economy will swing into focus later in the session, with the Empire State and Philly Fed manufacturing surveys due, alongside industrial production data.

'Looking ahead to the New York open, the lack of follow through in euro gains following the euro zone inflation data suggests that players are looking for another catalyst to resume U.S. dollar buying,' said Bank of New York Mellon currency strategist Michael Woolfolk.

London 1119 GMT London 0805 GMT

U.S. dollar

yen 104.98 up from 104.74

Swiss franc 1.0538 up from 1.0501

Euro

U.S. dollar 1.5497 down from 1.5527

yen 162.69 up from 162.64

Swiss franc 1.6330 up from 1.6307

pound 0.7970 down from 0.7973

Pound

U.S. dollar 1.9436 down from 1.9471

yen 204.05 up from 203.95