* Euro off overnight highs but largely holding gains after Draghi
* US GDP data later in session expected to show growth slowed
By Lisa Twaronite
TOKYO, July 27 (Reuters) - The euro steadied in Asian trading on Friday after rallying on European Central Bank chief Mario Draghi's vow to hold the euro zone together, as investors prepared for U.S. second-quarter gross domestic product data later in the session.
The euro traded at $1.2294, down from a two-week high of $1.2330 hit overnight but well above a two-year low of $1.2042 marked on trading platform EBS earlier this week. The next upside target is $1.2395-$1.2407, which is 50 percent retracement of the decline from 1.2748 on June 18 to this week's low.
"There are still factors that could pressure the euro, but for now, Draghi's comments yesterday have stopped its slide. However, if the ECB takes easing steps, that would be negative for the European currency," said Citibank Japan chief FX strategist Osamu Takashima.
The median of U.S. GDP forecasts from analysts polled by Reuters is for growth of 1.5 percent in the second quarter, down from the first-quarter's 1.9 percent expansion.
While a weaker-than-expected figure would pressure the greenback by increasing expectations that the U.S. Federal Reserve could adopt further monetary easing steps at its meeting next week, a stronger figure wouldn't necessarily strengthen the dollar, strategists said.
"It's highly unlikely even a strong print on GDP -- which would be out of the blue -- would really change the picture," said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co. in New York.
"We know already the quarter was weak, so what's more important now is the forward-looking perspective. Even if there were signs of ECB action, it would not necessarily change the Fed's course going forward. The Fed stands very little chance of achieving its goals on employment without further stimulus," Wilkinson said.
The Fed might eventually opt for a third round of quantitative easing in the form of large-scale bond purchases, known as QE3, or cut the interest rate it pays banks on the excess reserves they leave with the central bank.
On Thursday, Draghi pledged to do "whatever it takes to preserve the euro," sending a strong signal that the bank could take steps to rein in soaring Spanish and Italian borrowing costs.
Barring any strong objections from Germany or other euro zone members, the apparent new resolve of the European central bank could put a solid floor under the euro for now, as investors pare bets that the currency would continue to tumble as European debt turmoil festered.
"The only thing that could undermine the euro now is some backtracking from Draghi or some countering view from members of the Bundesbank who might not favour peripheral bond purchases. Given that there's still a massive amount of euro shorts in the market, it wouldn't take much to turn a spark into a flame," Wilkinson said.
Next week, investors will be watching the ECB meeting on Thursday to see if the central bank follows up Draghi's words with any plan of action.
"Draghi's comments were the clearest yet that the ECB does intend to do something, triggering major short-covering, but those gains might not be extended if there is a pause before action," said a market participant in Tokyo.
Against the yen, the euro also held much of its ground after gaining more than 1 percent on Draghi's comments, and was last buying 96.16 yen, moving away from a 12-year low of 94.12 yen touched on Tuesday this week.
Technical resistance now lies at 96.97 yen, which is the 38.2 percent retracement of the decline to the recent low from 101.62 on June 21.
The dollar held steady at 78.22 yen, above a seven-week low of 77.94 yen hit on Monday.
The increase in risk appetite benefited the Australian dollar, which rose to a one-week high of $1.0428 on Friday and was last buying $1.0424.
FSA investigates Barclays finance chief Chris Lucas over fees in financial crisis fundraisings - Daily Telegraph
Chairman Marcus Agius said in a statement on Friday: "We are sorry for the issues that have emerged over recent weeks and recognise that we have disappointed our customers and shareholders."
The Libor scandal has left big gaps at the top of the bank, with the resignation of Mr Agius, chief executive Bob Diamond and chief operating offer Jerry del Missier. Many analysts fear the the bank will struggle to replace them.
Underlying pretax profit rose 13pc to £4.2bn for the six months to the end of June, this is above forecasts of £3.8bn and included the £290m fine from US and UK regulators after it admitted manipulating Libor.
Statutory profits fell 71pc to £759m pre-tax, this included a £450m provision to cover the mis-selling of interest rate swaps and £300m of provisions for PPI mis-selling compensation claims.
Mr Lucas said that this was around £50m higher than the bank's initial estimate, and in a statement, the bank added the ultimate cost to the bank remained "uncertain".
Shares in Barclays rose 4pc in early trading on Friday.
Barclays finance chief investigated by FSA over fundraising - The Guardian
The Barclays finance director Chris Lucas is under investigation by the Financial Services Authority (FSA) in relation to funds raised in 2008, the embattled bank has revealed.
The latest potential run-in with the regulators comes as the bank scrambles to pick up the pieces surrounding the Libor scandal, which has already led to the resignations of four top directors at the bank.
As it announced £759m of pre-tax profits, down 71% from the £2.6bn of profits last year, the bank suggested the FSA believed not all the fees had not been disclosed in £7.3bn of fundraising mainly from Middle Eastern investors during the 2008 financial crisis. The fundraising helped the bank avoid a bailout by the taxpayer.
The bank said the FSA had "commenced an investigation involving Barclays and four current and former senior employees, including Chris Lucas".
"The FSA is investigating the sufficiency of disclosure in relation to fees payable under certain commercial agreements and whether these may have related to Barclays capital raisings in June and November 2008. Barclays considers that it satisfied its disclosure obligations and confirms that it will co-operate fully with the FSA's investigation," the bank said.
No further details were provided as the chairman, Marcus Agius, once again apologised for the Libor scandal, which has left the bank with a £290m fine and facing a wave of litigation that took up an entire page of disclosure in the half-year results.
The bank also admitted it was taking a provision of £450m for the interest rate swaps products which were sold to small businesses but now being investigated by the FSA.
Agius had resigned only to be reinstated as executive chairman in the wake of the Libor scandal, which has also forced the chief executive, Bob Diamond, to quit under pressure from regulators. Agius said on Friday that his replacement would be named before the new chief executive, which appeared to be contrary to earlier announcements which had said he would lead the search for a new chief executive.
Agius also refused to let Lucas respond to questions about whether he had offered to resign over the Libor scandal. He is the only executive director on the board of Barclays since the departure of Diamond.
"We are sorry for the issues that have emerged over recent weeks and recognise that we have disappointed our customers and shareholders. I speak for all of Barclays people when I say how determined we are to regain the full confidence of all our stakeholders; customers and clients, investors, regulators and staff alike," Agius said.
Agius's departure will follow that of Diamond, the chief executive operation officer Jerry del Missier, who has received a near £9m payoff, and the non-executive director Alison Carnwath, who resigned earlier this week. He said that despite not having a chief executive, the bank was still able to take decisions.
The bank preferred to focus on an adjusted profit before tax of £4.3bn, which was up 13% and stripped out a credit charge on its own debt of £2.9bn.
"The recent events have been challenging for Barclays and all those who work for the group. We continue to address the operational and control issues raised in connection with our Libor settlement with the US and UK authorities, many of which have been resolved over the course of the investigation," Agius said.
"Our citizenship agenda is now more important than ever; we have ambitious commitments that we must deliver and continue to evolve to address the issues that matter most to those we serve. We must focus on getting the fundamentals right – serving our customers and clients with integrity and maintaining the highest standards of service – while reviewing our business values and working to become more transparent," he said.
Barclays shares were the biggest rises in the FTSE 100 in early trading, up 4.2% at 160.32p, as the City welcomed the news that Barclays profits had beaten expectations.
Ian Gordon, banks analyst at Investec, said: "It's one in the eye today for Barclays' many enemies and detractors."
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