FOREX-German data fails to lift euro from 1-week low

* Graphic: FX rates in 2019 http://tmsnrt.rs/2egbfVh
* German economy returns to growth in March quarter
* Trade tensions cast shadow over risk appetite
* Australian dollar sags on weak China data

By Abhinav Ramnarayan and Saikat Chatterjee
LONDON, May 15 (Reuters) - The euro held at a one-week low
on Wednesday, ignoring data from Germany that showed the economy
returned to growth in the first quarter, as trade tensions
between the world's two biggest economies cast a shadow over
risk appetite.
The single currency has been caught in the cross-currents of
an escalating dispute between Washington and Beijing since last
week, unable to conclusively rise above the $1.1250 level.
"The announcement of the increased trade tariffs has
generated negative sentiment about global growth and that is
exerting downward pressure on the euro despite the German data,"
said Nikolay Markov, senior economist at Pictet Asset
Management.
U.S. President Donald Trump threatened higher tariffs on
billions of dollars of Chinese imports last week, and Beijing
responded with planned tariff hikes of its own on Monday.
The escalation in the trade dispute comes at a time when
latest data from Germany showed the economy returned to growth
in the March quarter as householders spent more freely and
construction activity picked up. The single currency EUR=EBS was broadly steady at $1.1213
- just above a one-week low of $1.1197 hit in the Asian session
and more than 3% below a 2019 high of nearly $1.16 in early
January.
Germany's economic figures were a sole bright indicator in
an otherwise slate of dismal data.
China on Wednesday reported surprisingly weaker growth in
retail sales and industrial output for April, adding pressure on
Beijing to roll out more stimulus as the trade war with the
United States rumbles on.
"We expected the data to be worse than last month, but this
is going to increase concerns about the state of the Chinese
economy. The market will be very nervous and looking out for the
PMI data," said Commerzbank FX strategist Esther Maria Reichelt.
The Aussie dollar AUD=D3 dropped as low as $0.6922, its
lowest level since Jan. 3 when a flash crash in the foreign
exchange markets rocked major currencies.
Barring that level, the currency was at its weakest in three
years and down 0.2% on the day.
The weak data gave further impetus to Aussie bears to add to
their negative bets with net outstanding short positions still
below 2019 highs of above $5.2 billion.
The Aussie is often seen as a proxy for Chinese growth
because of Australia's export-reliant economy and China being
the country's main destination for its commodities.
Domestic data added to the woes, with the pace of growth in
Australian wages stagnating.
Neighbouring New Zealand saw its currency NZD=D3 dip 0.1%
to $0.6567.
The Chinese yuan itself was slightly improved on the day at
6.8993 per U.S. dollar, but still close to a five-month low hit
on Tuesday. CNH=D3

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