March 7 (Reuters) - EUR/USD struck a fresh 4-month high Friday as investors responded to indications that the U.S. and euro zone economies are diverging to the benefit of the euro with risks that benefit may dramatically increase.

Euro zone Q4 GDP growth was revised upward, which could contribute to the ECB taking a less easy policy stance than previously expected, especially if Germany's defense and infrastructure spending plan wins approval and adds another potentially hawkish influence on the ECB. In contrast, U.S. February payrolls were close to expectations but did show signs of weakening.

Unemployment climbed to 4.1% from 4.0% in January while month-on-month average hourly earnings came in below estimates with January's result revised downward.

The U6 underemployment component jumped sharply to 8.0% from 7.5%. U.S. yields slumped on the report, allowing German-U.S. 2-year spreads and terminal rate spreads for the Fed and ECB to tighten, reducing the dollar's yield advantage over the euro. Though there is still a high degree of uncertainty over President Donald Trump's and DOGE's reduction of the size of government, markets may be inclined to see this as a potential source of future economic weakness. Thus, any further signs of economic divergence between the U.S. and euro zone could allow EUR/USD to remain bid. EUR/USD's rally could extend above resistance in the 1.0930/50 area and trigger stop-loss buying. Tests of the 2024 and 2023 yearly highs could then be on the cards.
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(Christopher Romano is a Reuters market analyst. The views expressed are his own)