The euro has soared to its highest level against the dollar this year, with the US losing its safe-haven status amid increasing signs of economic recovery.
The European single currency spiked to $1.4128, up from yesterday's close of $1.3943 yesterday. It was standing at $1.4124 in late trade this evening.
The embattled US economy shrank at a 5.7% pace in the first quarter, the government said today in a revised estimate that showed slower consumer spending, the key driver of growth. Most analysts had anticipated a better reading of a 5.5% decline in gross domestic product, the nation's output of goods and services.
The euro, seen as a higher-risk currency than the dollar, tends to strengthen when investor confidence and risk appetite improve due to signs of growing economic stability.
Data yesterday showed an unexpectedly strong 1.9% increase in US durable goods new orders in April and new US unemployment claims fell to 623,000 in the past week, a better reading than forecast by most analysts.
Earlier, dealers digested news that prices in the euro zone had stagnated in May over one year for the first time since records began. The Eurostat estimate put 12 month inflation in the euro zone at 0% in May, the lowest point since 1996.
Analysts said the data coupled with the prospect of prices falling in the coming months on an annual basis may cause the European Central Bank to cut interest rates to new lows.
