FOREX-Dollar mixed after disappointing headline Q4 U.S. GDP

(Recasts with U.S. GDP data, adds comment, updates prices, changes dateline, byline, previous LONDON)

* Euro short positions consolidating, keeps steady vs. Dollar

* Dollar off vs. yen, U.S. dollar index little changed on week

* Canadian dollar plunges after November GDP contraction

By Daniel Bases

NEW YORK, Jan 30 (Reuters) – The dollar traded mixed on Friday after weaker-than-expected headline U.S. fourth-quarter gross domestic product data, which included the fastest pace of consumer spending since 2006 and left intact market expectations of long-term greenback gains.

U.S. economic activity in the fourth quarter rose 2.6 percent, below economists’ consensus forecast of 3 percent and nearly half of the third quarter’s 5 percent rate.

While the U.S. Federal Reserve is still expected to begin raising interest rates later this year, the contrast with loosening monetary policies elsewhere in the world is becoming even more stark.

“That monetary divergence continues to dominate foreign exchange markets. The fundamental case for dollar strength is still in place as a long-term theme,” said Brian Daingerfield, currency strategist at the Royal Bank of Scotland in Stamford, Connecticut.

Market positioning against the euro has built up over the last six months in expectation that the European Central Bank would embark on aggressive monetary easing policies. That scenario played out last week when the ECB announced a 1 trillion-euro quantitative easing plan.

While that ultimately justifies selling pressure on the euro, the unwinding of short-euro positions is creating some buying of the currency, at least in the short term.

“The long-term position for the euro is decisively lower, but we seem to be consolidating short-euro positions here before the downtrend resumes,” Daingerfield said.

The euro gyrated above and below its break-even point on the day, and was down 0.12 percent at $ 1.1305 on the EBS trading platform. It was up 0.75 percent against the Japanese currency, trading at 132.99 yen.

However, the ECB’s decision and the consolidation of market positioning is putting the euro on pace to break a six-week losing streak.

The dollar fell 0.57 percent to 117.58 yen, and looks to end the week with a slight loss.

In contrast to the U.S. economy’s growth, albeit slightly lower in the first look at fourth-quarter activity, Canada’s economy shrank unexpectedly in November by 0.2 percent, prompting market talk that the Bank of Canada will cut interest rates in March for the second time in six weeks.

The U.S. dollar surged against its Canadian counterpart, rising to a fresh near-six-year high of C$ 1.2797 before slipping back to a 1.15 percent gain at C$ 1.2761. The Canadian dollar is on track for a 10th week of losses against the greenback.

“The data in hand do support the Bank of Canada’s very bearish interpretation of the impact of lower oil (prices) on the Canadian economy,” said Bill Adams, an economist at PNC Financial Services Group.

(Additional reporting by David Ljunggren in Ottawa; Editing by Jonathan Oatis)