FOREX-Euro hovers near 22-month lows as market awaits U.S. GDP data

The euro hovered near 22-month lows on Friday as traders waited to see whether U.S. GDP data due out later will reinforce signs of economic strength and send the dollar surging even higher.

After a small rise in volatility this week - albeit from multi-year lows - currency markets were quiet at the European open, with most major pairs stuck in tight trading ranges. The dollar index versus a basket of six major currencies inched lower to 98.101 after advancing to 98.322 on Thursday, its highest since May 2017.

The euro rose 0.1 per cent to $1.1140 New orders for U.S.-made capital goods increased by the most in eight months in March. That followed other recent U.S. data that have eased fears of a sharp slowdown in the world's biggest economy.

Data at 1230 GMT is expected to show that U.S. gross domestic product (GDP) increased by 2.0 per cent year-on-year in the first quarter. "This week's break in EUR/USD below $1.1200 has largely been a dollar store. Over the next few days, however, the focus could return to Europe," ING analysts said in a note, citing the election in Spain on Sunday, an S&P review of Italian sovereign debt ratings, and possible French economic reforms.

The Bank of Japan on Thursday put a time frame on its forward guidance for the first time by telling investors it will keep interesting rates at super-low levels for at least one more year, in a move aimed at dispelling any doubt over its commitment to ultra-loose policies. The yen was little changed on Friday, at 111.63 yen per dollar, after shedding 0.5 per cent overnight.

"The Chinese PMI and the U.S. non-farm jobs report are due over the next week and both are expected to be quite good. There is also the next round of U.S.-China trade talks, which could further lift risk sentiment," said Mitsuo Imaizumi, chief FX strategist at Daiwa Securities. "The market could thus see a significant increase in 'risk on' during the Japanese holidays, pushing dollar/yen towards 113.00 yen."

The Australian dollar rose 0.2 per cent to $0.7027. The Aussie has lost nearly 2 per cent this week, hitting a near four-month trough as soft domestic inflation data boosted the prospect of a rate cut by the Reserve Bank of Australia.

The New Zealand dollar rose 0.3 per cent $0.6647. Sterling, which has been hurt this week by dollar strength and concerns Brexit talks between the ruling Conservative and opposition Labour parties had run into the sand, clawed itself back above $1.29.