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Election risks, retail sales hurt pound and euro

* Euro slightly weaker on report French left may unite
* Dollar index on course for small weekly loss
* Weakened by halt in rise in Treasury yields since Wednesday
* Sterling hammered after poor retail sales
By Patrick Graham
LONDON, Feb 17 (Reuters) Falls for the euro and the pound dominated trade in the major global currencies on Friday, hit by a combination of nerves over upcoming French elections and signs British consumers are beginning to struggle in the face of the Brexit effect.
A week of trading dominated by fairly tight ranges and discussion of the outlook for U.S. inflation and interest rates looked set to end with the sixth loss in eight weeks for the dollar, quelling hopes of a new rally in the greenback.
But it was a report that suggested the French left could unite behind one candidate in presidential elections, possibly knocking centrist and right-leaning nominees out of the race in the first round, that grabbed the attention in the European morning.
The yen -- investors' favoured safe haven for capital in times of global and political uncertainty -- rose 0.4 percent against the dollar and 0.6 percent against the euro on the day.
The euro dipped around a quarter of a percent to $1.0648.
"It seems like a broader, but fairly small, risk-off move," said Josh O'Byrne.
"We saw the odds for a Le Pen victory move a bit higher this morning. That seemed to drive a bit of weakness in (bond prices in the euro zone) periphery as well."
Sterling meanwhile hit a 10-day low against the euro after a surprise third monthly fall running in British retail sales pointed to weakening consumer sentiment as the government gets ready to launch talks on leaving the European Union.
Shoppers have driven a relatively robust performance for Britain's economy since last June's Brexit vote but sales volumes fell 0.3 percent month-on-month in January - much weaker than forecasts for a 0.9 percent increase.
Those were just the latest signs of fatigue among households facing the impact of a 20 percent fall in the value of sterling and rising fuel prices.
"Retail was the beating heart of the UK economy in 2016, so with consumer spending expected to slide in the coming months we could see the pound push lower against both the euro and the dollar," said Paul Sirani, Chief Market Analyst at broker Xtrade.
U.S. government bond yields, rising steadily over the past 10 days, hit a wall on Wednesday and barring a broader revival in U.S. time, the dollar index was on course for another small weekly fall.
Many banks still expect the greenback to make more progress in the months ahead, but the signals on policy emerging from Washington have not engendered further confidence in U.S. President Donald Trump's promise to reflate the U.S. economy.
A combative presidential news conference on Thursday followed the resignation of National Security Adviser Michael Flynn this week and had analysts again wondering how effective the administration will be in pushing through its legislative agenda.
"Despite the relatively strong data we have seen, the dollar is not doing better and I think that is that moderation of expectations on Trump," Citi's O'Byrne said.
"Yesterday’s news conference perhaps was also an additional factor moderating that Trump theme
Reuters CJ
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