FOREX-Euro rises on strong German GDP, gains trimmed

(Changes byline, updates prices, adds quotes)

By Simon Falush

LONDON, May 15 (Reuters) - The euro strengthened on Thursday after Germany reported its strongest quarterly growth in 12 years but gains were muted as investors focused on likely slower growth ahead.

German gross domestic product expanded by 1.5 percent quarter-on-quarter in January-March, far exceeding forecasts and highlighting how much Germany has been buttressing the overall euro zone economy [nL15339192].

Along with a stronger-than-expected reading of French GDP growth, this helped the overall euro zone GDP figure for May increase by a stronger-than-expected 0.7 percent for the quarter [nL15156909].

However, the euro pared gains as some investors had expected an even stronger euro zone figure after the German gains came in so high.

"The German number really knocked the ball out of the park and given the sheer scale of the increase it's surprising there was not a bigger kick for the overall euro zone number," said Jeremy Stretch, strategist at Rabobank.

At the same time, figures showed that annual inflation in the euro zone was 3.3 percent in April, below March's record 3.6 percent, suggesting the possibility that inflation pressures may have peaked.

While the regional economy remains on firm ground for now, the Munich-based Ifo research institute's euro region economic climate index worsened to a five-year low in the second quarter, suggesting a slowing economy in coming months[ID:nBEB002089].