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Euro headed for weekly losses

Friday, August 15 09:18:31

The euro was on track for its fifth week of losses against the dollar on Friday, and hovered near five-month lows against the Swiss franc on growing worries about the euro zone's gloomy economic prospects and more monetary stimulus.

In Britain, a second reading of gross domestic product (GDP) could highlight the divergence between the British and euro zone economies. But traders said, the data is unlikely to provide much support to the pound given investors are still winding back bullish bets on the currency and pushing back expectations of a rate hike to the first quarter of next year.

Both the pound and the euro failed to build on knocks taken by the U.S. dollar following the release of lacklustre weekly jobless claims on Thursday and weak retail sales data earlier this week. Spotlight on Friday will be on U.S. industrial output data for July and consumer confidence for August.

The euro was little changed at $1.3370, having recovered from a brief dip to $1.3348 on Thursday and well below highs of $1.34 struck after the soft U.S. data was released. Most investors were selling into a bounce, keeping it close to a nine-month trough of $1.3333 and on track to end lower for the fifth straight week, according to Reuters charts.

It was steady against the Swiss franc at 1.2116 francs, having fallen to a five-month low against the Swiss franc of 1.2110 late on Thursday.

Data on Thursday showed growth in the euro zone stalled in the second quarter, with Germany suffering a surprise contraction. At the same time, inflation in the region was confirmed to have slowed to levels not seen since the height of the financial crisis nearly five years ago, leaving deflation a very real threat.

The dollar inched up against the yen to 102.52 yen. The greenback stood to gain about 0.4 percent against the yen this week although Treasury yields remained at low levels, with investors noting the emergence of bearish factors for the yen.

Sterling remained close to four-month lows of $1.6657 it hit on Thursday after the Bank of England indicated that it is in no hurry to raise interest rates. It was last trading at $1.6885, steady on the day.

The pound has shed almost 3 percent since hitting a six-year high of $1.7192 in mid-July when hopes were high for the BOE to hike rates later this year.

Britain will publish the second read on second-quarter gross domestic product at 0830 GMT. Economists polled by Reuters expected no revision from the 0.8 percent quarter-on-quarter expansion announced previously. (Reuters)

For more visit: www.businessworld.ie