Forex - EUR/USD erases gains on weak EU forecast

The euro erased gains against the U.S. dollar on Friday, hovering close to a six-week low as downbeat comments by the European Commission added to concerns over the outlook for growth in the euro zone. 

EUR/USD pulled away from 1.3245, the session high, to hit 1.3176 during European early afternoon trade, edging down 0.09%. 

The pair was likely to find support at 1.3039, the low of January 10 and resistance at 1.3290, Thursday's high. 

The euro weakened after the EU Commission said the euro zone economy will shrink for a second year in 2013, driving unemployment higher as governments, consumers and companies curb spending. 

The EU Commission forecast the bloc's gross domestic product to fall 0.3% this year, compared with a November prediction of 0.1% growth, and the unemployment rate to climb to 12.2%, up from the previous estimate of 11.8% and 11.4% in 2012. 

The single currency found support earlier, after the Ifo Institute said its business climate index for Germany improved to 104.6 in February from a reading of 100.6 the previous month, beating expectations for a rise to 101.3. 

Sentiment was hit on Thursday, after data showed that the services purchasing managers’ index dropped from 48.6 to 47.3 in February, while the manufacturing PMI fell to 47.8 from a final reading of 47.9 in January. 

Elsewhere, the euro was lower against the pound with EUR/GBP slipping 0.18%, to hit 0.8632. 

Trading volumes were expected to remain light on Friday, with no major economic data due to be published in the U.S.