Eurodollar down 2.4 this year, off 5month lows
Euro weakness limited as economic divergence with US ebbs
Parity still a possibility further out, analysts say

LONDONMILAN, May 14 Reuters The euro has resisted falling to parity with the dollar for now, thanks to a rosier economic backdrop, to the relief of European Central Bank policymakers who could be struggling to detach themselves from the Federal Reserve39;s monetary policy outlook.

Just a month ago, the euro39;s fall to fivemonth lows prompted some talk among analysts about a return to parity against the dollar as the fragility of the euro zone contrasted with a resilient U.S. economy that boosted the dollar and prompted investors to dial back Federal Reserve rate cut bets.

Lower euro area interest rates than those in the United States remain a headwind, but the euro seems on a stronger footing thanks in part to an improving macro backdrop.

The most recent round of purchasing manager surveys, for example, showed business activity in the euro zone expanded at a faster clip than that in the United States in April for the first time in a year.

That has helped the euro recover roughly 1.7 from April39;s lows to around 1.0708 .

Were starting to see that divergence between economic performance close, offering some help to the euro, said Fiona Cincotta, market strategist at City Index.

That is also a cause for relief for the ECB and a reason for them to be more relaxed as well. Its almost as if their ducks have…