FOREX-Dollar rises vs euro as European PMI data fails to impress

* Euro zone economy remains weak but green shoots emerging
-PMIs
* Pound drops as rate cut remains possible despite better
data

(Recasts, updates rates, adds comments from after open of U.S.
market; new byline, dateline; previous LONDON)
By Saqib Iqbal Ahmed
NEW YORK, Jan 24 (Reuters) - The dollar rose to a near
eight-week high against the euro on Friday as lukewarm European
PMI data added to the broader market conviction that European
central bank policymakers will maintain a loose monetary policy
for the near future.
Euro zone business activity remained lackluster with the IHS
Markit's Euro Zone Composite Flash Purchasing Managers' Index
(PMI), seen as a good gauge of economic health, holding at 50.9
in January but missing the median prediction in a Reuters poll
for 51.2. That followed an earlier PMI from Germany, Europe's largest
economy, which showed the private sector gained momentum.
The euro was 0.21% lower against the greenback at $1.1029.
=EUR
"The move partly reflected a phase of broader euro weakness
following the release of the flash Eurozone January PMI data
showing a miss in the composite headline, at 50.9, despite a
firm German reading," Jonathan Coughtrey, managing director, at
Action Economics said in a note.
The survey data comes a day after the European Central Bank
did not make any policy change, standing by its pledge to keep
buying bonds and, if needed, cut interest rates until euro zone
inflation headed back to its goal.
Friday's data added to expectations that a rate hike is
ruled out for the rest of the year, with Nordea analysts
expecting a 10-basis-point increase only in the second quarter
of 2023.
Though there are no expectations for a rate hike from the
U.S. Federal Reserve as well for the rest of the year, the
160-basis-point plus interest rate differential in benchmark
interest rates between the euro zone and United States is
expected to drive the single currency lower.
The euro EUR=EBS is set for its worst start to the year in
five years, down 1.5% so far this month, and trading at its
lowest levels since Dec. 2.
The dollar erased gains against the Japanese yen to trade
down 0.15% after the release of January services and
manufacturing PMIs from Markit showed the U.S. manufacturing
sector continuing to face pressure. Demand for the safe-haven Japanese yen, remained muted even
as China shut a part of the Great Wall and suspended public
transport in 10 cities in a bid to contain a virus that has
killed 26 people and infected more than 800. Sterling retreated on Friday, after initially strengthening,
as some investors still expected an interest rate cut next week
even though business surveys pointed to a post-election bounce
in the UK economy. The pound was 0.3% lower against the
greenback. GBP=

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Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh
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