LONDON (AFX) - The euro fell from its early highs to trade lower at midday as commercial selling and wariness about the single currency took their toll, dealers said.
"There's been some euro yen selling and there's been some story about the European Central Bank selling euros for commercial activities," Michael Lewis, a currency economist at Dresdner Kleinwort Wasserstein, said.
"There are also lots of M&A stories going around such as the proposed merger between Alcatel and Lucent, which could lead to U.S. investors selling the shares they receive in the French company and putting pressure on the euro," he added.
Lewis said equity-related flows were more in focus at the moment than inflation.
"The oil price is also heading higher which is bad for the euro," he said, adding that if the euro continued lower, the next support level is 0.8535 usd and after that 0.8430 usd.
"We need to see a strong bounce to 0.8700 usd for the market to feel that any rise is sustainable," he said.
In the UK, sterling was slightly higher, getting some support from stronger gross domestic product data, dealers said.
"GDP was slightly better than expected. There was a big rise in investment spending and consumption figures were subdued," Lewis said. UK GDP -- at constant 1995 market prices -- rose 0.4 pct in the first quarter from the fourth quarter, leaving it 2.6 pct higher year-on-year. This was revised upwards from preliminary estimates of 0.3 pct and 2.5 pct respectively.