NEW YORK: The dollar fell against the pound but held steady against most of its peers on Tuesday, as economic data continues to point to the resilience of the US economy and the chances of the Federal Reserve keeping interest rates higher for longer.
Business activity in the United States unexpectedly rebounded in February, hitting its highest level in eight months, according to a survey on Tuesday.
This follows recent robust data on retail sales, the labor market and manufacturing production, suggesting solid momentum in the economy at the start of the year.
“It’s increasingly clear that the US isn’t in any kind of a recession at the moment nor are there signals of a recession,” said Adam Button, chief currency analyst at ForexLive in Toronto.
“The market has had a big rethink of the possibility of a recession in 2023. The US economy has powered through higher interest rates so far, and the odds are increasing that the Federal Reserve will have to hike rates to 6% later this year,” he added.
The euro was last down 0.19% against the dollar to $1.0666 as it came under pressure after data showed euro zone manufacturing activity deteriorated, although a rebound in the more inflation-sensitive services sector kept losses in check.
The British pound was the notable exception, rising 0.38% to $1.2081, extending its two-day gains against the greenback. That left the dollar index, which tracks the US currency against six major peers, at 103.87, or up 0.02%. slightly down from a high of 104.26 earlier in the day.
The pound strengthened on Tuesday after data showed an unexpected bounce in British business activity, suggesting the economy may be sidestepping the risk of recession. The euro has been struggling against the dollar in particular over the past couple of weeks, after strong US labor data and signs of persistent inflation have raised the chances that US interest rates will rise further than many previously anticipated.
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