Euro falls in London

The euro fell on Tuesday, retreating from a three-week high versus the dollar, after weak German and eurozone growth data sparked concerns about a slowdown and piled pressure on policymakers to act decisively to address the region's debt problems. German data showed GDP growth slowed to 0.1 percent in the second quarter, much less than a consensus forecast of 0.5 percent, and pushed the single currency down more than 1 percent against the safe-haven Swiss franc.
Eurozone GDP data showed the economy grew by just 0.2 percent over the same period, adding to pessimism about the region, which is already struggling with a mounting sovereign debt crisis. All these are likely to see investors stay wary about the common currency in coming days.
The euro was last down 0.6 percent versus the dollar at $1.4366, with support near its 100-day moving average at $1.4353. Sell-stops are cited below $1.4320 while on the topside there is talk of option barriers at $1.45. It reached a nearly three-week high of $1.4477 on Monday. Market focus is now on a Franco-German summit at which President Nicolas Sarkozy and Chancellor Angela Merkel will discuss potential solutions to the region's debt crisis. The two leaders will meet in Paris from 1400 GMT this afternoon and a joint news conference is expected at 1600 GMT.
A focal point is whether there will be any signs of progress toward the issuance of common eurozone bonds, although officials in Paris and Berlin have said Tuesday's talks will not address that matter. A Dutch government coalition party said it was not in favour of a common bond, dragging the euro to a session low. Analysts said while the summit would be closely scrutinised, few in the market are expecting a credible solution to a debt crisis that has spread from the eurozone's periphery to the core economies of Italy, Spain, and most recently France.
"The GDP data shows the eurozone economy is slowing very sharply. It's not just a peripheral problem any more, it's spreading to the core," said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi UFJ. The euro fell to 1.1178 francs after the German GDP data, giving back some of the gains made on Monday, when it surged roughly 2.3 percent.
It was last trading at 1.1215 francs, down 0.9 percent on the day. Earlier, the Swiss National Bank declined comment on market talk that it was checking rates in the forward market. The Swiss franc had slid against the dollar and the euro on Monday on speculation the SNB may soon take drastic measures to curb gains in the currency by setting a cap on the Swiss currency and pegging it to the euro.
Euro/Swiss franc 1-month vols were trading higher than other major currencies at around 23.0 percent, compared with 24.25 on Monday. Analysts said the SNB was likely to take further steps to dampen the franc, as they have done in the past, but the authorities would struggle to stem the tide of safe-haven flows as investors sought refuge from the eurozone crisis. The dollar held steady against the yen at 76.77 yen, having dropped back to levels seen before Japan's record yen-selling intervention on August 4, and hovering near a record low of 76.25 yen hit in March.