(Alliance News) - The euro marched to its best level against the dollar since the final stretch of 2021, as tariff nerves hit the greenback, while the pound slipped to a one-month low against the single currency on the back of tepid UK data.

"President Trump threw yet another high-and-tight tariff fastball, reviving threats and reminding everyone that July 9 isn't just a date, it's a deadline," SPI Asset Management analyst Stephen Innes commented.

Innes also noted that safe havens, such as the yen and Swiss franc, traded strongly on Middle East tensions. Normally the market's favourite haven, the dollar did not benefit. The euro surged instead, wearing "the crown of de-dollarisation", according to the analyst.

"The dollar's inability to hold its ground amid the Middle East tinderbox poised to ignite tells a deeper story about the 'sell America' trade. The dollar should have caught a bid, and it didn't."

Against the yen, the greenback faded to JPY143.33 on Thursday afternoon UK time from JPY144.53 a day prior. Versus the Swiss franc, it fell to CHF0.8110 from CHF0.8194.

Versus the dollar, the euro shot up to USD1.1615 on Thursday, from USD1.1483 on Wednesday. The euro was at its best level since October 2021.

Sterling rose to USD1.3610 from USD1.3544, as a poor UK gross domestic product reading held back its own progress against the dollar. Versus the euro, the pound fell to EUR1.1717 from EUR1.1794. Sterling fell below EUR1.17 earlier Thursday, to sit at its worst level since late-April.

According to the Office for National Statistics, the UK economy shrank by 0.3% in April from March. It had expanded 0.2% in March from February.

The reading for April fell short of expectations, as a smaller decline of 0.1% was expected, according to market consensus cited by FXStreet.

"Payback from Q1's outsized 0.7% rise in GDP was always expected as the surge in net exports and business investment ahead of US tariffs unwound and coincided with tax and national insurance increases as well as rises in domestic energy bills," analysts at Lloyds Bank commented.

"The monthly decline in April GDP, however, was weaker than our sub-consensus estimate and provided further confirmation that Q1's strong growth outturn was highly unlikely to be repeated in Q2."

Versus the Canadian dollar, the buck fell to CAD1.3623 on Thursday from CAD.1.3652 on Wednesday. Versus the Australian dollar, however, it rose slightly to AUD1.5314 from AUD1.5301.

"The Australian and New Zealand dollars are consolidating recent gains as US-China trade tensions have abated, while the USD failed to regain much ground. Pitching a big rally in AUD and NZD has been harder compared to the outperforming European currencies, which are incidentally benefiting from stronger repatriation flow effects. However, reduced external economic risks related to China can allow AUD and NZD to enjoy some outperformance relative to peers with similarly high beta to risk sentiment in the coming weeks," analysts at ING commented.

By Eric Cunha, Alliance News news editor

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