2018.03.0106:25:00UTC+00Euro Weakens Amid Risk Aversion

The euro retreated from its early highs against its most major counterparts in the European session on Thursday, as European shares dropped amid mixed earnings updates and caution ahead of Federal Reserve chair Jerome Powell's second congressional testimony later in the day.

The German DAX lost 1 percent, France's CAC 40 index was moving down 0.9 percent and the U.K.'s FTSE 100 was declining 0.5 percent.

Powell will appear before the Senate Banking Committee to deliver semi-annual testimony, after advocating the case for aggressive Fed rate hikes in his testimony on Tuesday.

Investors digested mixed final manufacturing PMI reports from the euro area.

Final data from IHS Markit showed that the Eurozone manufacturing sector continued to expand at a robust pace in February but the pace of growth slowed from January.

The factory Purchasing Managers' Index fell to a 4-month low of 58.6 from 59.6 in January.

In Germany, the manufacturing sector activity grew at a slightly slower rate in February.

The PMI dropped less-than-estimated to 60.6 from 61.1 in January. The flash reading was 60.3.

The currency held steady against its major rivals in the Asian session, with the exception of the yen.

The euro pulled back to 1.1517 against the Swiss franc, from a 2-day high of 1.1543 hit at 3:30 am ET. If the euro falls further, it may find support around the 1.14 mark.

Data from the State Secretariat for Economic Affairs showed that Switzerland's economy expanded more than expected at the end of 2017.

Gross domestic product climbed 0.6 percent sequentially in the fourth quarter.

The single currency declined to 1.2180 against the greenback, its weakest since January 18. The next possible support for the euro is seen around the 1.20 level.

The euro fell back to 130.00 against the yen, from an early high of 130.47. This may be compared to near a 6-month low of 129.85 hit at 7:30 pm ET. The euro is likely to find support around the 128.00 level.

Survey data from the Cabinet Office showed that Japan's consumer confidence weakened unexpectedly in February, though slightly.

The seasonally adjusted consumer confidence index dropped to 44.3 in February from 44.7 in January.

The common currency reversed from an early more than 2-week high of 1.6960 against the kiwi, dropping to 1.6889. On the downside, 1.66 is seen as the next support level for the euro.

On the flip side, the euro firmed to near a 2-week high of 0.8877 against the pound and held steady thereafter. The pair finished Wednesday's trading at 0.8861.

Survey data from IHS Markit and the Chartered Institute of Procurement & Supply showed that the British manufacturing sector expanded at the weakest pace in eight months in February.

The Purchasing Managers' Index, or PMI, dropped slightly to 55.2 in February from 55.3 in January.

Looking ahead, U.S. jobless claims for the week ended February 24, ISM manufacturing index for February and construction spending for January are set for release in the New York session.