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EUR/USD drops as robust U.S. growth rate sparks dollar rally

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Shutterstock photo - - The euro dropped against the dollar on Thursday after official data revealed the U.S. economy grew in line with healthy expectations in the fourth quarter of 2013, which should keep the Federal Reserve on track to dismantling stimulus programs as the year progresses.

In U.S. trading, EUR/USD was trading at 1.3547, down 0.86%, up from a session low of 1.3544 and off a high of 1.3685.

The pair was likely to find support at 1.3529, the low from Jan. 23, and resistance at 1.3717, Monday's high.

The dollar rallied after the Commerce Department said gross domestic product expanded 3.2% in the three months to December, in line with most forecasts, even outpacing some, following a 4.1% rise in the third quarter.

Consumer spending rose by 3.3%, the strongest since the fourth quarter of 2010, while exports grew by 11.4%.

The data strengthened the dollar by cementing market expectations for the Federal Reserve to continue trimming its monthly bond-buying program, which weakens the greenback pushing down long-term interest rates.

On Wednesday, the Fed said it was cutting the program to USD65 billion from USD75 billion. The program launched in late 2012 at USD85 billion in monthly purchases of Treasury and mortgage debt.

Elsewhere on Thursday, the Labor Department said the number of individuals filing for unemployment assistance in the U.S. last week rose by 19,000 to 348,000 from the previous week's revised total of 329,000.

Analysts were expecting the figure to remain relatively unchanged at 330,000, though investors shrugged off the data.

Separately, the National Association of Realtors said its pending home sales index dropped by a seasonally adjusted 8.7% last month, disappointing expectations for a 0.3% gain, which also failed to dampen spirits.

Rough winter weather has taken its toll on recent economic indicators, though general market attitudes persist that U.S. recovery remains on track.

Meanwhile in Europe, Germany's consumer price index slowed to 1.3% in January from 1.4% in December, missing expectations for an uptick to 1.5%.

German inflation fell 0.6% in January from a month earlier. Market expectations were for a decline of 0.4%.

Also on Thursday, data showed that the number of unemployed people in Germany fell by 28,000 in December, outstripping expectations for a decline of 5,000. The German unemployment rate was unchanged at 6.8%.

A separate report showed that Spain's recovery picked up in the fourth quarter, with gross domestic product expanding by 0.3%, up from 0.1% in the three months to September.

The euro was down against the pound, with EUR/GBP falling 0.39% to 0.8218, and down against the yen, with EUR/JPY trading down 0.35% at 139.24.

On Friday, the euro zone is to release preliminary data on consumer inflation and a separate report on the unemployment rate across the currency bloc.

The U.S. is to round up the week with a report on manufacturing activity in the Chicago region, revised data on consumer sentiment and a report on personal spending. offers an extensive set of professional tools for the financial markets.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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