- The euro dropped on Thursday after a European manufacturing and service-sector gauge missed market expectations, though mixed U.S. data cushioned the single currency''s losses against the greenback.

In U.S. trading, EUR/USD was trading at 1.3705, down 0.21%, up from a session low of 1.3686 and off a high of 1.3763.

The pair was likely to find support at 1.3562, the low from Feb. 12, and resistance at 1.3774, Wednesday''s high.

Markit Economics reported earlier that the euro zone composite output purchasing managers’ index ticked down to a two-month low of 52.7 this month, down from January’s 31-month high of 52.9.

Analysts were expecting a 53.1 reading, and the report softened the euro due to the continent''s still high unemployment rates and soft inflationary pressures, which many think will prompt the European Central Bank to loosen policy if recovery flounders.

Elsewhere, soft output data out of China weakened the euro by sending investors to safe-haven yen and dollar positions.

The preliminary reading of China’s HSBC manufacturing index fell to a seven-month low of 48.3 this month, down from 49.5 in January, falling further below the 50 level that separates expansion from contraction.

Data out of the U.S. capped the greenback''s advance by keeping speculation strong that the Federal Reserve will very gradually dismantle dollar-weakening stimulus tools.

The Federal Reserve Bank of Philadelphia said that its manufacturing index deteriorated to minus 6.3 in February from January’s reading of 9.4. Analysts had expected the index to inch down to 8.0 in February.

Earlier Thursday, the Department of Labor said the number of individuals filing for unemployment assistance in the U.S. last week fell by 3,000 to 336,000, slightly below expectations for a decline of 4,000.

In a separate report, the Labor Department said U.S. consumer prices rose 1.6% on a year-over-year basis in January, in line with forecasts. Consumer prices were 0.1% higher from a month earlier, also matching forecasts.

Core consumer prices, which are stripped of volatile food and energy components, were also up 1.6% on a year-over-year basis and 0.1% from the previous month.

The Fed has said it will pay close attention to data when determining the pace at which it tapers its $65 billion in monthly bond purchases.

Fed asset purchases aim to spur recovery by suppressing long-term borrowing costs, which boosts demand for stocks in hopes investing and hiring follow suit, thus weakening the dollar by enticing investors out of safe-haven asset classes.

The euro was down against the pound, with EUR/GBP sliding 0.07% to 0.8228, and down against the yen, with EUR/JPY trading down 0.26% at 140.15.

On Friday, the U.S. is to round up the week with private-sector data on existing homes sales.

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