(Recasts, updates yields, adds trade talk news)
The U.S. dollar was left flat in Thursday afternoon trade after first rising on a report that U.S. Treasury Secretary Steven Mnuchin had considered easing tariffs imposed on Chinese imports, then retracing those gains after his office denied the claim.
Mnuchin discussed lifting some or all tariffs on Chinese goods and suggested offering a tariff rollback during trade discussions scheduled for Jan. 30, the Wall Street Journal reported on Thursday, citing people familiar with the internal deliberations.
The dollar index .DXY initially rose 0.07 percent to 96.124, until a repudiation of the report from the Treasury secretary's office left the index last at 96.058, unchanged from the previous day's close.
Earlier, the greenback rose against a euro dragged lower by soft economic data, while the pound took off on hopes of a second referendum on Britain's membership in the European Union.
Against the euro, the dollar EUR= strengthened as much as $1.1367, its highest in nearly two weeks. It was last at $1.139, with the single currency still weaker on soft data out of the euro zone. Inflation data for the European Union showed price pressures receding further from the central bank's target, complicating the situation for the European Central Bank which currently expects to raise interest rates later this year.
The euro has fallen 0.70 percent against the dollar since Tuesday morning, when Germany reported its economy grew by 1.5 percent in 2018, the weakest rate of expansion in five years.
"The data that has been coming out of Europe this week has certainly been on the softer side and suggests that from an economic standpoint they are technically in a recession," said Dean Popplewell, chief currency strategist at Oanda.
The British pound rose to a two-month high against the euro EURGBP= , extending recent gains on growing expectations Britain can avoid a no-deal withdrawal from the European Union. Talk of a second referendum vote in the UK sparked a rally in afternoon trade which further lifted the currency.
Prime Minister Theresa May has been meeting lawmakers from all parties in an attempt to find a way out of an impasse over how Britain should leave the EU, after May's own plan was resoundingly rejected by parliament on Tuesday. While she has repeatedly rejected a second referendum, a vocal campaign in favor of holding a new vote has the support of some lawmakers.
The pound GBP= also firmed toward a two-month high against the dollar. It was trading 0.77 percent up at $1.299, its highest since Nov. 15.
