Euro loses ground in late London trade on strong US data

The euro weakened against the dollar in late trading, as a strong set of US economic numbers boosted both Wall Street stocks and the US currency, analysts said.

Whereas yesterday's upward revision to third-quarter US GDP had triggered worries about high inventory levels leading to a weak fourth quarter, today's data provided reassurance about the pace of the US economy in the final months of the year, said Hans Redeker, global head of FX strategy at BNP Paribas.

The euro dropped below $0.99 but had trouble making further headway, with technical support in the 0.9880/$90 area, said Steve Pearson, head of currency strategy at HBOS.

Among a stronger-than-expected set of US data, the Chicago Purchasing Managers index climbed above the critical 50 level for the first time since August, reaching 54.3 in November compared with an October reading of 45.9.

Durable goods orders rose a larger-than-expected 2.8% in October, the first rise since July, while consumer spending also rose slightly more than expected last month. And jobless claims fell 17,000 in the week ended Nov 23, against expectations of a rise.

The only negative for the US economy was an unexpected downward revision in the University of Michigan November consumer sentiment index.

Sterling also fell against the dollar on the US data, but Chancellor of the Exchequer Gordon Brown's pre-budget report had only a limited impact on the currency, analysts said.

While Brown revised down his 2002 growth forecast to 1.6% from 2.0-2.5%, he stuck to a forecast of 2.5-3.0% for 2003 and said he expects growth to recover to 3.0-3.5% in 2004.

Redeker said Brown is probably overoptimistic, with his forecasts for UK growth above those of the OECD, and sterling could lose further ground on concerns about foreign direct investment flows.