Forex

LONDON (Thomson Financial) - The euro briefly spiked to another all-time high against the dollar after weaker-than-expected US GDP and jobless claims data.

Figures released today showed that the US economy grew at an annualised pace of just 0.6 pct in the fourth quarter, its slowest pace since 2002. This was unrevised from the previous estimate but was below analysts' forecasts for a slight upward revision to 0.7 pct.

Meanwhile, US weekly jobless claims data continued to suggest the labour market is weakening more than previously thought.

The number of first-time claims filed in the week ending Feb 23 rose by 19,000 to 373,000 from an upwardly revised 354,000 claims in the previous week, way above forecasts for around 350,000. Continuing claims for unemployment meanwhile climbed to their highest level in over two years, the figures showed.

'US Q4 GDP growth was left unrevised ... but domestic demand was apparently weaker than initially thought, with a strong showing from net external demand the only thing preventing the economy from slipping into recession over the final three months of last year,' said Paul Ashworth at Capital Economics.

'With initial jobless claims getting closer to the 400,000 a week mark, the odds clearly favour a recession at some point in the first half,' he said.

Immediately after the data, the euro jumped to a new record high of 1.5146 usd, though it soon dropped back down to around the 1.5120 usd level, with analysts citing options barriers at the 1.5150 usd mark.

'Euro/dollar options into 1.5150 remain intact for the moment, with the structures living to fight another day -- or in this case another event-risk,' said Matthew Foster-Smith at Thomson IFR Markets.

He noted that markets are taking a breather ahead of speeches this afternoon by European Central Bank president Jean-Claude Trichet and US Federal Reserve chairman Ben Bernanke.

Elsewhere, the PCE inflation indicator within the GDP data also highlighted the dilemma facing rate-setters at the US Federal Reserve, who have been cutting interest rates aggressively in an attempt to stave off a recession, just as inflation has been spiking higher.

The headline PCE index was revised up to a 4.1 pct annual rate from 3.9 pct previously, while the core PCE index -- closely tracked by the Fed -- stood at 2.7 pct, well above the central bank's unofficial comfort zone of below 2 pct.