NEW YORK: The US dollar tumbled to a two-month low on Tuesday in choppy trading after another round of weak economic data reinforcing investor bets that the Federal Reserve is nearly done with its tightening cycle even as other central banks are seen still raising interest rates to overcome persistently high inflation.

Sterling rose to a new 10-month high against the dollar, while the euro reached its highest since February.

On Tuesday, the rate futures market priced in a roughly even chance of a 25 basis-point rate hike in May, with rest of the odds tilted towards a pause from the Fed. On Monday, the probability of a 25-bp hike was more than 65%.

The rates market has also factored in Fed cuts by end-December.

Sterling rose to $1.2520, its highest since June 2022, after breaching a significant resistance level. The pound last changed hands at $1.2508, up 0.8%. “$1.2448 has been a huge technical chart resistance. It has been a high twice this year,” said Joe Tuckey, head of FX analysis at Argentex. “Breaking through this means it is an initiation point for fresh sterling buyers, a short covering area for sterling shorts.”

The euro reached $1.0964, its most in two months. It was last up 0.5% at $1.0956.

The Australian dollar was last down 0.7% at US$0.6739.

Elsewhere, the dollar fell 0.6% against the Japanese yen to 131.74.