* Euro pressured as euro zone economies shrink; at $1.4910
* Euro zone second quarter growth shrinks 0.2 pct
* U.S. CPI up later: core seen +0.2 pct
(Changes byline, adds quotes, updates prices)
By Veronica Brown
LONDON, Aug 14 (Reuters) - The euro came under pressure on
Thursday, as figures showing contraction in the euro zone's
economy backed an increasingly gloomy view of global growth,
giving a further boost to the U.S. dollar.
German and French growth shrank in the second quarter,
culminating in a 0.2 percent contraction in overall euro area
growth that raised the spectre of recession in Europe.
The dismal readings came a day after the Bank of England
issued a bleak outlook for the UK economy, while official
figures showed Japan's economy shrank in the second quarter and
Australia's central bank said it wouldn't wait for inflation to
fall before cutting interest rates.
The deterioration in global growth has stoked expectations
for monetary easing from central banks around the world sooner
or later, reducing the yield advantage many currencies such as
the euro and sterling currently enjoy over the dollar.
Weak growth and subsequent rate differentials now appear to
be the driving factor in determining exchange rates, more so
than oil prices, equity markets or financial market tensions.
"The contraction in second quarter GDP cements the extremely
negative newsflow we've seen over the summer. For a long time
we've been saying pay attention, the euro zone is slowing and
this has to be priced into the currency markets," said Teis
Knuthsen, head of FX research at Danske in Copenhagen.
"It's likely that the increased attentiveness to the risk of
a global recession is likely to be quite substantial," he added,
saying that the path of least resistance in trading on a euro
area slowdown was further gradual euro weakness.
At 1110 GMT, the euro was off 0.1 percent at $1.4905 <EUR=>.
The dollar index -- a measure of the dollar's value against six
major currencies -- was up 0.1 percent 76.321 <.DXY>.
The dollar was up 0.2 percent against the Japanese currency
at 109.69 yen <JPY=>. Sterling was up 0.2 percent $1.8736
<GBP=>, having fallen as low as $1.8620 earlier in the global
session, a level not seen for almost two years.
GROWTH OVER INFLATION
Official figures on Thursday showed that the French economy
contracted by 0.3 percent in the second quarter, compared with
predictions of 0.2 percent expansion.
Germany, the euro zone's economic powerhouse, shrank by 0.5
percent, not quite as much as the 0.8 percent contraction
analysts had expected. Still, taken together, the outlook for
the euro zone economy isn't a bright one.
"You come out with a weak (GDP) number and you get shot.
That's the way the market's working now," said David Bloom, head
of global currency strategy at HSBC.
"Inflation is just so yesterday. It's all about growth.
That's the flavour," he said.
While the U.S. economy is hardly cause for unbridled
optimism, even accounting for encouraging exports and trade
data, currency investors continue to give the dollar the benefit
of growing global doubt.
"In contrast to the euro, the dollar continues to show
resilience of late, clocking up gains against its G10
counterparts. Any ease in today's inflation figures is likely to
give cause for comfort," said Societe Generale strategists in a
note.
Official data at 1230 GMT are expected to show underlying
U.S. consumer price inflation at 0.2 percent in July, easing
slightly from a 0.3 percent increase the previous month. [].
(Reporting by Veronica Brown; Editing by Ron Askew)
