NEW YORK: The US dollar fell against most major currencies on Tuesday after better-than-forecast growth data from China, while strong pay figures from Britain supported the pound.
China’s gross domestic product (GDP) grew 4.5% year on year in the first three months of the year, data showed, beating analyst forecasts for a 4% expansion as the end of COVID-19 curbs lifted the world’s second-largest economy. Separate data on March activity in China also showed retail sales growth quickened to 10.6%, beating expectations and hitting a near two-year high, while factory output growth also sped up but was just below expectations.
“The view on the dollar getting a bit weaker from here against the majors is predicated on a strong China,” said Thierry Wizman, Macquarie global FX & rates strategist in New York. “When you have the rest of the world doing well or better than US in terms of activity... that’s usually bad for the dollar.” Also driving dollar weakness is that there is likely US disinflation at the moment, a reason the Federal Reserve is going to pause hiking interest rates, Wizman said.Futures traders are pricing in an 87.4% chance of the Fed raising rates by 25 basis points at its next meeting in May, with traders still expecting rate cuts towards the end of the year.
US single-family homebuilding increased for a second straight month in March, while permits for future construction surged, offering a bit of hope for the depressed housing market ahead of the busy spring selling season.
“The dollar can remain sensitive to the strength, or not, of the economic data as the Fed likely nears the end of their tightening cycle,” said Kristina Clifton, an economist at Commonwealth Bank of Australia (CBA).
The Australian dollar rose 0.34% versus the greenback at $0.672 after Reserve Bank of Australia (RBA) minutes showed the central bank considered an 11th-consecutive rate hike in April before deciding to pause. The RBA, however, said it was ready to tighten further if inflation and demand failed to cool.
The yen strengthened 0.38% at 133.99 per dollar.
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