U.S. import prices fell in April due to a drop in oil costs, a positive sign for household finances that also pointed to benign inflation pressures. More U.S. data will emerge this week, including Wednesday's industrial production, housing starts and consumer prices on Thursday and consumer sentiment data on Friday.
Euro Steady vs. Dollar
The euro swung between minor gains and losses to last trade flat, with stronger-than-expected euro zone industrial output data offset showing German investor morale pointing to a tepid recovery in Europe's largest economy.
The euro got a slight boost after Fitch Ratings agency upgraded Greece's sovereign credit rating to B-minus from CCC, with a stable outlook.
The euro remains weighed down by the risk that the European Central Bank could slash its deposit rate, at which banks park surplus funds with it, to negative. Depositors would be charged for leaving funds at the ECB, which would pressure the euro.
Germany's ZEW think tank said its monthly poll of economic sentiment rose to 36.4 points from 36.3 in April, falling short of expectations for a reading of 38.3.
Other data, however, showed output at euro zone factories rose much more strongly than expected in March, but the overall picture remained mixed as industrial output decreased in France and Italy, the bloc's second- and third-largest economies.
(Read More: Euro Zone Factory Output Jumps on Energy, German Strength)
"The euro seesawed after the mixed data from the region largely offset (each other), keeping in place sentiment that's largely bearish," said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington. "Expectations that the ECB might further cheapen borrowing rates to spur recovery at a time when the days of the Fed's super-easy monetary policies appear increasingly numbered have been among the chief catalysts driving the euro lower," he said.
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Growth will return to the euro zone's recession-mired economy in the second half of this year, but economists see no chance it will recover strongly until at least 2015, a Reuters poll showed on Tuesday.
While some ECB policymakers have talked openly of cutting the deposit rate below its current level of zero percent, a majority of economists and traders polled in the past week think such a move is unlikely.
The European Central Bank clashed with Germany on Tuesday over how quickly the euro zone should complete a system to deal with failing banks. The euro last traded flat against the dollar at $1.2974.