Forex - EUR/USD drops on surging U.S. consumer confidence data

The euro dropped against the dollar on Friday after a widely watched consumer sentiment barometer blew past expectations.

In U.S. trading on Friday, EUR/USD was down 0.40% at 1.2831, up from a session low of 1.2796 and off from a high of 1.2890.

The pair was likely to find support at 1.2796, the earlier low, and resistance at 1.3029, Tuesday's high.

The Thomson Reuters/University of Michigan's preliminary consumer sentiment index rose to 83.7 in May from 76.4 in April, surging past expectations for a rise to 78.0. 

The University of Michigan also said its inflation expectations for this month remained unchanged at 3.1%.

The numbers came a day after Federal Reserve Bank of San Francisco President John Williams  said that monetary authorities may begin to unwind stimulus programs this summer and possibly end such policies by year end.

Philadelphia Fed President Charles Plosser, a known inflation hawk, added separately that the Fed should consider scaling back the program next month.

Monetary stimulus tools, such as low interest rates, dovish language and the Fed's monthly USD85 billion asset-purchasing program, weaken the dollar to spur recovery.

Weak industrial output, inflation data and other economic indicators had many investors betting in recent sessions that the Fed may prolong dismantling stimulus programs, which pressured the dollar lower until Friday's data broke.

The euro, meanwhile, was up against the pound and down against the yen, with EUR/GBP trading up 0.15% at 0.8448, and EUR/JPY trading up 0.23% at 132.04.