FOREX-Contrasting data gives euro upper hand vs dlr

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By Veronica Brown

LONDON, May 16 (Reuters) - The dollar drifted down versus the euro on Friday, pressured by the contrast between Thursday's weak U.S. jobs and manufacturing data and forecast-beating growth figures from the euro zone.

The U.S. data injected a hint of doubt into market expectations that the Federal Reserve's aggressive cycle of interest rate cuts is over. Further clues on the depth of the U.S. economic slowdown will come on Friday from April housing starts and building permits numbers at 1230 GMT and the May Reuters/University of Michigan consumer sentiment index at 1355 GMT. All three measures are seen weaker.

By contrast, Thursday's strong first-quarter growth figures from Germany and France boosted the euro as they highlighted the relative strength of the European economy compared with the United States.

The dollar also slipped versus the yen after Japanese data showed growth of 0.8 percent in the first three months of this year, above market expectations for a 0.6 percent increase [ID:nT210001].

Credit Suisse currency strategist Adam Myers said that while there were rising expectations that Europe's economy would slow, the problems in the U.S. were far from over.

"I'm very much in the camp where I think the dollar will probably weaken further from here. Europe is not going to be anywhere as badly affected with a continuing slowdown in the real economy as the U.S. is," he said.

"Europe will slow down but its slowdown is not going to have the same impact on financial markets and lending and therefore consumers than it will in the U.S."