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 The dollar, bolstered by expectations the U.S. Federal Reserve will
be the first major central bank to raise interest rates, has gained
nearly 5 percent against a basket of currencies this month.
It paused on Friday at 94.752, ahead of U.S. GDP data due at 1330
GMT (4:30 a.m ET), which a Reuters poll tipped to show economic
growth of 3.0 percent. But the currency stayed close to an 11-year
high and was set to mark seven consecutive months of gains.
European shares also took a breather on Friday but were headed for
strong monthly gains in anticipation of hundreds of billions of
euros being pumped into the euro zone.
Russia surprised markets by cutting interest rates as fears of a
Russian recession mount following a plunge in global oil prices and
Western sanctions over the Ukraine crisis. The move put pressure on
the rouble, which skidded as much as 4 percent against the dollar,
and also bolstered expectations that Turkey will cut rates again
next week, sending the lira to a new record low.
U.S. shares looked set to open lower, after surging late on Thursday
as an upturn in oil prices, stronger-than-expected U.S. jobs numbers
and a rally in Apple and Boeing helped offset some disappointing
earnings.
Having opened higher, European stocks dipped as troubled Banca Monte
dei Paschi di Siena <BMPS.MI> lost 6.5 percent after sources said a
planned capital increase at the lender might be bigger than
expected.
The FTSEurofirst 300 index of top European shares was down 0.2
percent at 1,470.40 points, but still up 7.4 percent in January - on
track to post its best monthly performance in three years and
outpacing Wall Street where the S&P 500 <.SPX> is down 1.8 percent
since the start of the year.
"It's a little pause ahead of the weekend, but there's no real
selling pressure and technically, charts shows that indexes are
still in a bullish trend. People are just cautious, with a couple of
potential negative catalysts like Russia and Greece in mind, so it's
tempting to book profits," Saxo Bank trader Andrea Tueni said.
European stocks have recently been lifted by expectations that a
bond-buying program by the European Central Bank will help the
region's economic recovery, while a weaker euro and lower oil prices
are seen reviving corporate profits.
Yields on euro zone bonds dropped, with deflation risks taking
center stage again after some reassurances from the new Greek
government that it is looking for common ground with EU partners on
its bailout.
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Data from the 19-nation bloc showed inflation falling further into
negative territory in January, with consumer prices falling 0.6
percent year-on-year.
EYES ON U.S GDP
The euro edged down against the dollar to $1.1305 as markets awaited
U.S. GDP data.
The single currency is down over 6 percent for the month, its worst
performance in 2-1/2 years, having fallen on the expectation, and
then the confirmation, that the ECB would unleash QE to shore up the
flailing euro zone economy.
Those gains have helped the dollar.
"There are a lot of investors waiting for a move higher in the euro
to reload (on the dollar)," said Michael Sneyd, a currency
strategist at BNP Paribas in London. "We are still dollar bulls."
Gold edged up on Friday and was set for its biggest monthly gain in
almost a year after a rally fueled by the ECB's announcement of its
1.1 trillion euro easing program.
Brent crude edged up to $49.3 a barrel, supported by renewed
violence in Iraq, but with a persistent global supply glut keeping
the market on course for a seventh straight month of declines, its
longest bear run on record.
(Additional reporting by Atul Prakash, Marius Zaharia and Patrick
Graham in London and Lisa Twaronite in Tokyo; Editing by Janet
Lawrence and Susan Fenton)
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