FOREX-Euro's advance slows as risk sentiment falters

* No dovish surprise from Fed helps dollar bounce
* German GDP plunges
* Q2 earnings weigh on European bourses
* Worry about U.S. fiscal package, China tension
* Graphic: World FX rates in 2020 https://tmsnrt.rs/2RBWI5E

By Julien Ponthus
London, July 30 (Reuters) - The euro retreated on Thursday
after a two-month rally against the dollar, as Germany reported
disappointing economic output for the second quarter and the
Federal Reserve maintained its support for the U.S. economy.
The euro was set to end July with its best monthly gain in a
decade, a 4.7% jump, but a shift in the bullish mood is
threatening the milestone.
The euro lost about 0.34% to $1.1752 as the continent's
stock markets fell after disappointing second-quarter earnings
weighed on morale EUR=EBS .
"The change in risk sentiment this morning has prompted some
traders to buy the greenback as it has been a safe-haven play
recently", wrote David Madden, an analyst at CMC Markets.
"The euro came under more pressure on the back of the German
flash GDP reading."
The German economy contracted by a worse-than-expected 10.1%
in the second quarter, its steepest plunge on record, as
household spending, business investment and exports collapsed
during the COVID-19 pandemic. "Now it's official, it's the recession of a century," said
DekaBank economist Andreas Scheuerle. The country's statistics
office said the plunge was the worst since 1970.
Other EU indicators were more encouraging. Euro zone
economic sentiment, for example, rebounded more than expected in
July. Industry gained, although became more gloomy.
Many traders, however, believe that the euro is on a
structural long-term trend against the dollar after EU leaders
agreed on a massive recovery fund that will bring the bloc
closer to a fiscal union.
The target of $1.20 for the euro is a popular one among
foreign exchange strategists, and demand for options that would
benefit from such a rise shows bulls haven't given up on more
gains.
The fact that Fed Chair Jerome Powell didn't shift his
position to a more dovish one and called for more fiscal support
to prop up the economy also helped the dollar. Investors are now eying an impasse in Congress on another
stimulus package and the latest weekly jobless numbers, due at
1230 GMT.
Advance GDP data is due at the same time from the United
States, and it's expected to be grim. Economists forecast an
annualised 34% drop for the past quarter. In Asia, the yen JPY= dipped 0.2% to 105.10 per dollar.
Tensions with China dragged on risk, adding to pressure on the
Antipodean currencies.
The Australian dollar AUD=D3 was down 0.55% at $0.7148
and the kiwi NZD=D3 slipped 0.57% to $0.6631.
Sino-U.S. relations have deteriorated over issues ranging
from the pandemic to Beijing's territorial claims in the South
China Sea and its clampdown on Hong Kong.
Elsewhere, the Turkish lira recovered from a record low
against the euro EURTRY= . It remains under pressure from
concern over depleted reserves and local demand for dollars
despite state efforts to stabilise trading.