RTTNews - The euro saw weakness against its lower-yielding rivals on Friday in New York as weaker global stocks has reduced risk appetite. With the drop, the common currency gave back gains from earlier in the week.

Eurozone consumer prices declined at the fastest pace on record in July. However, the slower-than-expected economic contraction in the second quarter allayed fears of deflation and suggests that inflation will soon turn positive in the single currency bloc.

Stocks fell as Reuters and the University of Michigan released their preliminary report on consumer sentiment in the month of August, showing the consumer sentiment index unexpectedly decreased compared to the previous month.

The euro has dropped to 1.4230 against the dollar, giving back some of its recent climb. The European currency reached as high as 1.4326 yesterday.

The consumer sentiment index fell to a reading of 63.2 in August from a reading of 66.0 in July. The decrease surprised economists, who had been expecting the index to increase to 69.0.

The euro was little-changed versus the pound after earlier rising to a 2 1/2-week high. The European currency moved as high as 0.8653 but later fell back to 0.8600.

A report published by UK's Council of Mortgage Lenders showed that there were 11,400 cases of mortgage possession in the second quarter, down 10% from 12,700 in the first quarter of the year. But, the second quarter level stood above the 10,000 cases of possession in the second quarter of 2008.

The euro tested a 2 1/2-week low against the Japanese yen. The 16-nation currency touched as low as 134.19, challenging the 134.07 hit earlier in the week.

The European Union statistics office Eurostat revised the annual decline in consumer prices for July to 0.7% from the flash estimate of 0.6%. This was the second consecutive month of decrease and the biggest fall on record. Prices were down 0.1% in June. Month-on-month, consumer prices dipped 0.7% in July.

Dresdner Kleinwort economist Rainer Guntermann expects Eurozone inflation to stay negative until the final quarter of the year. Further, the fundamental outlook suggests no concrete inflationary or deflationary tendencies in Eurozone, the economist said.

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