The euro has fallen back slightly from its recent peaks against the dollar as investors continued to take profits. But traders say there is no sign of any serious sell-off and the currency is likely to consolidate before once again moving higher.

The euro closed at $0.9507 in European trading yesterday from $0.9525 on Friday.

Comments from Bank of England governor Sir Edward George as he left a meeting of central bankers in Basle also undermined the euro. Sir Edward suggested the downturn in the US may not be as bad as many had predicted. Central bankers expected the US slowdown to be short-lived and to bring growth to more sustainable levels.

The retreat in the euro was limited as investors continued to expect the downturn in the US to far exceed that in Europe.

In addition, there are fears that financial problems at Californian utilities may spill over to the financial sector.

The euro has gained almost 8 per cent against the dollar in the past month as reports suggested euro-zone growth would outstrip US growth. Many analysts are forecasting growth rates of about 3 per cent for the US and euro zone this year. That compares with growth of more than 5 per cent in the US last year. The figure for the euro zone was about 3.4 per cent.

Reports this week are expected to underline slowing US growth, which may push the euro higher. US retail sales data due on Friday are expected to show a decline in December, including slowing demand for new cars and trucks.

By contrast, the euro zone's business climate indicator rose in December to +1.24 from +1.21. German output rose a seasonally adjusted 0.4 per cent after falling 0.1 per cent in October.

These figures make less likely an interest rate cut from the ECB in the short term. In contrast, the US Federal Reserve is expected to cut rates at its next meeting on January 31st.

"There will be another half percentage point cut in the US at the end of this month," said Mr Tony Norfield of ABN Amro.