December 14, 2018 / 9:03 AM / 2 months ago

FOREX-Euro struggles on weak data; dollar boosted by Chinese disappointment

* Euro hobbled by ECB, poor PMI numbers in Germany, France

* Dollar headed for best week since September

* Aussie, sterling back on the ropes

* Graphic: World FX rates in 2018 tmsnrt.rs/2egbfVh

By Tommy Wilkes

LONDON, Dec 14 (Reuters) - The euro fell on Friday as the euro zone economy showed more signs it’s beginning to sputter, while the dollar made some headway as investors turned nervous about a slowdown in China.

The euro was hurt on Thursday when the European Central Bank cut forecasts for economic growth and inflation. The reduction was modest, but it underscored concerns about a euro zone slowdown and the central bank’s caution as it ends its bond-buying scheme and tries to wean the region off stimulus.

On Friday, German data showed private-sector expansion slowed to a four-year low in December, adding to the euro’s woes. French business activity unexpectedly contracted.

The euro fell 0.4 percent to $1.1308 in early European trade. The dollar rose across the board.

“The euro simply lacks domestic catalysts for a more meaningful rally,” ING analysts said.

The dollar found broad support as the euro and pound came under pressure, the latter because of renewed concerns about Britain’s withdrawal from the European Union. Analysts say the next catalyst for larger moves in the dollar will be the Federal Reserve’s Dec. 18-19 meeting. It is expected to raise interest rates and give guidance on the pace of any tightening next year.

“There is a lot of disagreement in the markets over the Fed’s rate hike course in 2019 with traders expecting anywhere between one to four rate hikes,” said Michael McCarthy, chief markets strategist at CMC markets.

The dollar, up 1 percent since Monday, is headed for its best weekly performance since late September.

Against a basket of its peers, the dollar rose 0.4 percent, with its index at 97.455.

The yen was unchanged at 113.59 yen per dollar. The dollar has gained 1.2 percent versus the Japanese currency in the past six trading sessions as interest rate differentials between U.S. and Japan support the dollar.

The offshore Chinese yuan fell 0.4 percent to 6.9037 after worse-than-expected economic data. Retail sales grew in November at their slowest pace since 2003 and industrial output rose the least in nearly three years.

Most analysts expect help from the Chinese authorities, including interest rate cuts, to support the economy, which would keep the yuan under pressure.

The Australian dollar lost 0.8 percent to $0.7169. China is Australia’s largest trade partner.

Sterling fell 0.6 percent to $1.2683 as traders worried Prime Minister Theresa May was struggling to secure assurances from the EU over her Brexit withdrawal deal. (Additional reporting by Vatsal Srivastava in Singapore, editing by Larry King)

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