By Josie Cox
The euro gave up early gains against the dollar Friday, after
data showed that U.S. consumer prices rose for the third straight
month in April, sending the buck sharply higher.
By midafternoon in Europe, the bloc's single currency was 0.7%
lower at around $1.103, having earlier in the session hovered
around the $1.12 mark.
The dollar also rose almost 0.5% against Japan's yen and by
almost 1% against the British pound.
Early dollar selling Friday had been inspired by recent weaker
U.S. data, but by midafternoon almost all of those moves had been
reversed.
"Markets are incredibly volatile at the moment and any U.S. data
is being watched incredibly closely," said Jane Foley, a senior
strategist at Rabobank in London.
Friday's data, she said had "reignited the debate" around a U.S.
Federal Reserve interest rate raise this year.
Much of the economic data this week drove many investors to push
back expectations for Fed action until next year, Ms. Foley said.
"But Friday's figures might encourage some reconsideration."
A strong U.S. economy is likely to encourage the Fed to raise
interest rates sooner, which would make the dollar more attractive
to yield-hungry investors.
Mirroring the turnaround in currency markets, equities reversed
earlier losses Friday and by midafternoon the Stoxx Europe 600 was
up 0.2%.
European companies rely heavily on exports and tend to benefit
from a weaker euro, especially against the dollar.
That said, Germany's DAX index which includes a particularly
high proportion of major exporters, was trading 0.1% lower on the
day. Earlier in the session, Germany's Ifo measure of business
confidence weakened for the first time in seven months in May,
while separate data showed that German domestic demand had
propelled the economy in the first quarter of the year.
On Wall Street, the S&P 500 has opened largely
unchanged.
Brent crude was around 2% higher on the day around $65.20, while
gold was flat at $1,204 per troy ounce.
Later in the day, U.S. Federal Reserve Chairwoman Janet Yellen
will address the Greater Providence Chamber of Commerce.
Back in Europe, German Chancellor Angela Merkel said Friday
there was still "very, very intensive" work needed to find a
solution to Greece's financial woes. Ms. Merkel held talks with
Greek Prime Minister Alexis Tsipras and French President François
Hollande on the sidelines of a meeting of European Union leaders in
Riga, Latvia.
European Commission President Jean-Claude Juncker is expected to
meet Mr. Tsipras Friday afternoon.
Write to Josie Cox at josie.cox@wsj.com