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FOREX-Euro slips to two-week low after EU cuts growth forecast

Kitco News

* Euro weaker after EU slashes forecasts
* Kiwi stumbles on jobs data
* Sterling shade lower ahead of Bank of England policy meeting
* Graphic: World FX rates in 2019 (Recasts with EU forecast, updates prices)

By Tom Finn

LONDON, Feb 7 (Reuters) - The euro fell to a two-week low on Thursday after the European Commission sharply cut its forecasts for economic growth in the euro zone.

Global trade tensions and growing public debt are hastening a slowdown in the largest countries of the bloc, complicating the European Central Bank's plans for an interest rate hike this year and weakening the single currency.

The euro has lost around 1.3 percent over the last week as investors bet the ECB will keep monetary policy accommodative faced by low inflation in the single currency area.

The currency was down 0.2 percent at $1.1332, a two-week low.

It dropped earlier in the session after German industrial output unexpectedly fell in December for the fourth consecutive month, underscoring fears about a broader slump in Europe.

"Another day, another piece of terrible German data. EUR/USD risks a move to $1.1300," said ING's chief EMEA FX and interest rate strategist, Petr Krpata.

Elsewhere the Australian dollar weakened further on expectations that interest rates will come down this year due to growth risks at home and abroad.

In a remarkable shift from its long-standing tightening bias, Australia's central bank on Wednesday opened the door to a possible rate cut and acknowledged threats to the economy. That saw the Aussie slump 1.8 percent in its worst one-day decline since June 2016. Investors were caught off-guard because a day earlier the Reserve Bank of Australia steered clear of an easing signal.

On Thursday the Aussie hovered near a more than one-week low at $0.7103.

The New Zealand dollar was down 0.3 percent at $0.6765 following weaker-than-expected unemployment data on Thursday.

The dollar index, a gauge of its value versus six major peers was up 0.2 percent at 96.52, hovering close to its two-week high. The index has gained for three consecutive sessions.

Elsewhere, sterling was marginally lower at $1.2914. The British pound has weakened by 1.3 percent in February due to Brexit woes.

The United Kingdom is on course to leave the European Union on March 29 without a deal unless British Prime Minister Theresa May can convince the bloc to reopen the divorce agreement she reached with it in November.

The Bank of England is scheduled to meet later on Thursday and is widely expected to keep interest rates unchanged.

"The BoE won't even consider changing interest rates until the terms to leaving the EU become clear," said Kathy Lien, managing director of currency strategy at BK Asset Management.

"BoE Governor Mark Carney will reiterate his warning about the risks of a disorderly Brexit and reassure investors that they are ready to increase stimulus if it causes a major disruption in the markets," Lien added.

(Reporting by Tom Finn; Editing by Toby Chopra)
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