* German, French GDP help euro zone data beat forecasts
* Dollar weak ahead of University of Michigan reading
* Australian dollar lifted by China CPI
By Laurence Fletcher
LONDON, Feb 14 Better-than-forecast euro zone
growth numbers helped push the euro to its highest level in
almost three weeks versus the dollar on Friday as investors bet
European Central Bank action to avert deflation next month was
The single currency rose as high as $1.3715 after
slightly stronger-than-expected growth in Germany and France
pushed euro zone fourth-quarter GDP up 0.3 percent, above a
forecast of 0.2 percent.
The dollar was weak after softer-than-forecast U.S. data on
The euro zone data is likely to help reduce expectations
that the ECB will cut interest rates at next month's meeting,
after President Mario Draghi last week declared more information
was needed before deciding on any action.
This week ECB Executive Board member Benoit Coeure said the
idea of cutting the rate the ECB pays banks to hold their
deposits overnight into negative territory was "a very possible
"When you see better growth data the market quite simply
thinks there's less chance of deflation and less chance of
Draghi taking action, which is currency-supportive," said Jane
Foley, senior currency strategist at Rabobank.
She said she expects no action from the ECB next month as it
will take Draghi "a few months at least" to assess the inflation
"The euro should remain well supported. If we get another
couple of weeks of really bad U.S. data, that could promote the
idea that the Fed (halts tapering its bond-buying stimulus), and
the euro could be up there (at $1.37-1.40)."
The euro was flirting with the $1.37 level, the top of the
daily Ichimoku cloud, a technical measure that is significant
for chartists as a close above that level could be seen as
sending the euro higher.
Dag Muller, technical analyst at SEB in Stockholm, pointed
to key levels for the euro at $1.3740 and $1.3562.
"It ($1.3740) is a point where those who want to trade
euro-dollar on the short side will give up," he said. "But if it
breaks Wednesday's low of $1.3562 then euro-dollar bears will
start to smile again."
The euro was also helped as the spread between U.S. 2-year
Treasuries and 2-year German bunds
Yields were weighed down by U.S. retail sales, which fell
unexpectedly in January, while more Americans filed for jobless
benefits last week, the latest signs the world's biggest economy
started the year on a softer footing as bad weather took its
The dollar index slid to a low of 80.065, its lowest
since the start of the year, and was last at 80.094, down 0.3
percent, ahead of the University of Michigan's sentiment reading
later on Friday.
The dollar was down 0.3 percent against the yen at 101.82
The greenback's weakness comes despite new Federal Reserve
chairman Janet Yellen's testimony this week that the central
bank was on track to keep reducing its stimulus even though the
labour market recovery was far from complete.
"The recent string of worse-than-expected indicators from
the U.S. are calling into question the recovery scenario there,"
said Marshall Gittler, head of global FX strategy at IronFX
The Australian dollar was in focus after it dropped one full
U.S. cent on Thursday in the wake of surprisingly weak labour
However, it continued to rebound on Friday, rising 0.6
percent to $0.9030, helped by data from China that
showed consumer prices rose 2.5 percent in January, broadly in
line with expectations.
China is Australia's main export market and the Aussie
dollar is often used as a liquid proxy for investor bets on the