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Euro strong against USD, US stocks flat

Thursday, January 31 16:33:40

The euro rallied against the dollar today en route to its best monthly performance in more than a year, while U.S. stocks were flat in muted trading, with investors reluctant to make large bets ahead of the key U.S. jobs figures on Friday.

U.S. data continued to paint a mixed picture of the world's largest economy. A measure of business activity in the U.S. Midwest rose in January to its strongest since April, but an earlier report indicated a rise in U.S. jobless claims in the latest week.

A drop in German retail sales initially put the euro under pressure, but the recent bullish trend resumed during U.S. trading. The single currency was headed for its best month in 15 months against the dollar on Thursday, as signs of recovery in the euro zone's economy, and in its banks, helped it gain against the dollar.

The euro hit a peak of $1.3593 on Thursday before pulling back slightly. The Federal Reserve's promise of continued support was widely expected to keep downward pressure on the dollar. The dollar, meanwhile, edged higher against the yen to 91.20 yen.

"The overall recent trends are intact," said Nick Bennenbroek, head of currency strategy, at Wells Fargo Bank in New York. "The euro probably wants to go higher and the yen probably wants to go lower."

Recent gains in risky assets such as equities, commodities, and high-yield debt have eased after sharp advances in the last six months. Growth in emerging economies such as China has picked up and fears of a collapse of the euro have been calmed by the European Central Bank.

Data on Wednesday showed U.S. GDP slipped 0.1 percent where a rise had been expected, although the Federal Reserve indicated the pullback was likely to be brief and repeated its promise to continue supporting the economy.

But the main focus is on U.S. payrolls data on Friday for a take on the health of the world's biggest economy.

"Unfortunately it's still a mixed picture. It appears we are just getting a lot of conflicting data right now," said Jack Ablin, chief investment officer at BMO Private Bank in Chicago. ( C) Reuters