(Adds comments, details, updates prices)
* Dollar rises broadly after rise in April home sales
* Euro falls after weaker French and German sentiment data
* ECB says recent data points to lower growth
By Vivianne Rodrigues
NEW YORK, May 27 (Reuters) - The dollar rose broadly on
Tuesday after a report showed an unexpected rise in U.S.
new-home sales in April, while data out of Europe raised
concerns over the health of the euro zone economy.
Demand for the European currency started to dim on news
French business confidence slumped to a 2-1/2-year low this
month [], while the forward-looking German GfK
index pointed to an unexpected deterioration in consumer morale
in June [].
The data cast doubts over whether the European Central Bank
would contemplate raising interest rates to tame inflation this
year.
"Recent data out of Europe doesn't support the euro," said
Matthew Strauss, a currency strategist at RBC Capital Markets
in Toronto. "If the outlook in the region continues to
deteriorate the ECB eventually may have to change its neutral
stance on rates and adopt a more dovish tone."
The euro then slipped to a session low of $1.5702 <EUR=> in
New York after a report showed U.S. sales of newly constructed
single-family homes rose 3.3 percent in April to a 526,000
annual rate, above markets expectations. []
In late morning trading the euro was last down 0.3 percent
at $1.5722. A drop in oil prices from record highs also lifted
the dollar, analysts said. U.S. crude oil futures fell almost
$2 on Tuesday.
"The dollar appears to be looking at oil prices right now,"
said Ron Simpson, director of foreign exchange research at
Action Economics in Tampa, Florida.
The dollar index gained 0.4 percent to 72.234 <.DXY>. The
greenback also rose against sterling, pushing the British
currency down nearly 0.4 percent to $1.9750 <GBP=>.
ECB TALK
ECB Governing Council member Klaus Liebscher said recent
data hints at lower euro zone growth this year and next, but it
is too soon to say inflation has peaked [].
Another ECB governing member, Axel Weber, also on Tuesday
said the prospect of an interest rate cut by the ECB this year
was "wishful thinking." []
While an economic slowdown may be just beginning in the
euro zone, in the United States some investors hope the worst
is over and the Federal Reserve's steep 3.25 percentage points
of rate cuts since September are sufficient to provide the
stimulus needed to reinvigorate the economy.
Other U.S. releases on Tuesday included the S&P/Case
Shiller house price index for March, which showed prices of
single-family homes plunged a record 14.1 percent in the first
quarter from a year earlier.
In yet another report, U.S. consumer confidence plunged
unexpectedly to a 16-year low in May amid rising gasoline costs
and falling home prices. At the same time, inflation
expectations rose to an all-time high of 7.7 percent.
"The consumer confidence report has two components summing
up the intensifying dilemma facing the Fed. You've got the
index dropping across the board, while the one-year inflation
expectation index soars higher," said Ashraf Laidi, chief
market analyst at CMC Markets in New York.
"The Fed has two choices -- to be behind the inflation
curve or behind the growth curve," he said. "For currency
markets, any shift by the Fed toward more hawkishness does not
necessary auger well for the dollar, because it's a shift away
from a growth."
(Additional reporting by Nick Olivari and Steven C. Johnson in
New York; Editing by Leslie Adler)
