Euro retreats in London

The euro retreated from this week's record high against the yen and a two-month peak versus the dollar on Tuesday after a German economic sentiment indicator tumbled to a five-year low in August.
The ZEW economic research institute said its economic expectations indicator for Germany, based on a survey of 307 analysts and institutional investors, fell for a seventh straight month to -5.6, the lowest since June 2001, from 15.1 in July.
"It would appear that institutional investors are nervous over a number of factors...a number of headwinds are probably affecting sentiment and we've seen that reflected in the index," said Jeremy Stretch, market strategist at Rabobank.
Analysts also said however that while the survey highlighted investor concerns, it would not blow the European Central Bank off course in its determination to raise interest rates further from the current 3.00 percent to ward off inflation.
"Overall, the outcome will be taken as bad news for the euro but for now we do not expect it result in a significant paring back in ECB rate hike expectations," Calyon head of global foreign exchange research Mitul Kotecha said in a note to clients. By 1143 GMT, the euro was down 0.13 percent on the day at 149.17 yen, having fallen sharply after the ZEW's release. It hit a record high of 149.75 on Monday.
The euro was down 0.4 percent at $1.2839 while the dollar was up a quarter percent at 116.16 yen.
Earlier data showed French provisional second-quarter growth was up 1.1 percent on the quarter, its highest since the fourth quarter of 2000.
Robust economic growth figures released last week for the eurozone in the second quarter have helped to boost the euro, which has risen more than 8 percent this year against the dollar.
But analysts say a rising euro has a negative effect on growth as it makes eurozone exports more expensive, which may slow down the pace of the ECB tightening in the future.
Morgan Stanley estimates an every 3 percent rise in the euro trade weighted index has the same effect on growth as a 50 basis points tightening. Later in the session investors will be looking at the Richmond Federal Reserve's August manufacturing survey later which might add to concerns about a US economic slowdown.
The Fed is widely expected to leave interest rates at 5.25 percent in September, having kept them unchanged this month for the first time in its two-year tightening campaign.