Euro edges higher after German jobs strength

London

THE euro gained slightly on Thursday after data showing German unemployment falling more than expected pointed to continued strength in the eurozone's largest economy, while end-of-quarter investor rebalancing limited broader currency moves.

The single currency had been on the back foot earlier in the day as the dollar showed some strength, but the German data helped the euro recover.

It traded 0.1 per cent up at US$1.2318 against the dollar but its gains were tempered by German inflation figures easing a slight slowdown in price rises.

"The political risk has come out of the euro in the last two weeks so data is the story right now," said Jeremy Cook, head of FX strategy at WorldFirst. The euro has been weighed down recently by comments from some European Central Bank officials suggesting the ECB is in no hurry to wind back its stimulus, given the spectre of low inflation.

The dollar meanwhile fell slightly by 0.1 per cent to 89.954 against a basket of major currencies.

Investors took profits after a hefty rise in the previous session, with traders remaining bearish about the outlook for a currency headed for its fourth consecutive quarter of losses.

Global markets were shaken this month when US President Donald Trump moved to impose tariffs on Chinese goods and Beijing threatened similar measures.

But fears of a full-blown trade war have eased on hopes negotiations can bring a compromise.

Quarter-end and month-end flows have boosted the dollar in recent days as global asset and fund managers rebalanced portfolios.

Data showing fourth-quarter US economic growth slowed less than estimated also supported the greenback.

Analysts said this week's jump for the dollar looked overdone, however, and that many of the structural reasons for the US currency's decline - trade and budget deficits and monetary tightening in other parts of the world - remained.

"Is US protectionism good or bad? The market is very undecided about this, but the dollar's bounce was a little bit too bold from the market's perspective," said Ulrich Leuchtmann, head of FX strategy at Commerzbank. REUTERS