FOREX-Euro slips, German data points to weak euro zone
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By Naomi Tajitsu
LONDON, May 27 (Reuters) - The euro slipped from a one-month high against the dollar on Tuesday, relinquishing earlier gains after weak German consumer sentiment figures stoked concerns that cracks in the euro zone economy are starting to show.
The GfK index of German consumer morale unexpectedly fell to 4.9 for June, indicating that sentiment is set to crumble next month as weakness in other parts of the region trickles through [ID:nL27534969].
Despite other data showing that German's economy posted its strongest growth in 12 years in the first quarter [ID:nL2761394], currency investors focused on the weak GfK reading along with surprisingly soft French sentiment and housing figures [ID:nL27730607].
"Markets have started to wake up to the possibility that Europe is slowing down," said Ian Stannard, senior foreign exchange strategist at BNP Paribas.
"Today's data is consistent with that view," he said, adding that figures showing more weakness in the German economy would likely keep the euro from revisiting a record high around $1.6020 hit roughly a month ago.
The euro slipped to a session low of $1.5737 EUR=, pulling away from a one-month high of $1.5818 hit earlier in the session as UK markets re-opened after a public holiday on Monday. U.S. traders will also return from a holiday later on Tuesday.
At 0727 GMT, it traded at $1.5750, down nearly 0.2 percent on the day according to Reuters data.
The weak European figures boosted the dollar, which jumped more than 0.2 percent to 72.175 .DXY against a basket of six major currencies, its highest level of the day and pulling back from an earlier slide.
It also rose against sterling, pushing the UK currency down nearly 0.3 percent to $1.9764 GBP=.
The dollar rose 0.4 percent to 103.80 yen JPY=.
Despite the dollar's gains, some market participants said that ongoing high oil prices would likely continue to weigh on the U.S. currency. U.S. crude prices hovered around $133 per barrel CLc1, near record highs hit last week.
Investors also expected U.S. economic data and speeches this week by Federal Reserve officials including Chairman Ben Bernanke on Thursday to provide a clearer picture of the deteriorating U.S. economy.
"Any weaker-than-expected data is highly likely to trigger dollar selling as investors are now focusing on the slower U.S. economy," said Shuichi Kanehira, a senior forex trader at Mizuho Corporate Bank.
New U.S. home sales for April and consumer confidence for May are due at 1400 GMT. (Editing by Stephen Nisbet)
