Forex - Euro off highs as market consolidates after last week's dollar rally

- LONDON (Thomson Financial) - The euro was off its earlier high against the dollar, but the currency markets remained broadly steady, consolidating after last week's sharp rally by the U.S. currency.

Comments by Klaus Liebscher, an ECB governing council member and outgoing governor of Austria's central bank, that there is 'no room for complacency' on euro zone interest rates and high inflation, sparked a short recovery in the euro.

The comments conflicted with those of central bank president Jean-Claude Trichet, who surprised markets on Thursday by giving a downbeat growth outlook for the euro zone, leading markets to write off any chances the ECB might raise interest rates again soon, having increased them by a quarter-point to 4.25 percent in July.

However analysts said there is still scant possibility that euro zone interest rates will again, especially with GDP figures this week set to show growth in the 15-nation single currency zone grinding to a halt.

Peter Stoneham at Thomson IFR Markets said: 'A couple of euro supportive factors helped underpin a euro bounce...however, the market appears reluctant to undo any more of the dollar's recent recovery and as such we are now seeing consolidation.'