Singapore, Feb 22 (BNA): The dollar and sterling found support on Wednesday after a surprising rebound in business activity in the US and UK raised the possibility that their respective central banks will have more efforts to raise interest rates.
Elsewhere, the euro tried to recoup losses from the previous session, even as the eurozone’s composite PMI rose to a nine-month high of 52.3 in February, boosted by surprisingly strong services growth, Reuters reports.
Data released on Tuesday showed that US business activity unexpectedly rebounded in February to an eight-month high, while the UK’s Composite Purchasing Managers’ Index (PMI) similarly rose to 53.0 this month, above the 50 threshold for growth for the former. time since July.
The dollar rose broadly while the pound last bought $1.21015, holding most of Tuesday’s gains of 0.6%.
The euro rose 0.05% to $1.0652, after falling 0.36% in the previous session.
said Rodrigo Catrill, chief currency analyst at the National Bank of Australia.
“I think the euro is still in a more difficult position, given that there is a general sense that the ECB still has more work to do, and that puts a little bit of pressure in terms of the growth outlook.”
In contrast, the kiwi was 0.1% higher at $0.62195, after rising to an intraday high of $0.6248 earlier in the session following a rate hike from the Reserve Bank of New Zealand (RBNZ).
The Reserve Bank of New Zealand on Wednesday raised its cash rate by 50 basis points, as expected, signaling further tightening as inflation in the economy remains very high.
“Upward pressures for inflation prevail, so unless the wheels fall off the economy soon, another 50 basis point hike looks likely at this point,” said Matt Simpson, senior market analyst at City Index.
But its timing could be dictated by Hurricane Gabriel’s direct impact.
The Australian dollar fell 0.31% to $0.6835, pressured by Wednesday’s data showing that Australian wages grew at the fastest annual pace in a decade from the last quarter, but remained below market expectations. That could reduce the pressure for more aggressive increases in domestic interest rates.
Against the Japanese yen, the dollar fell marginally to 134.91 after rising to a two-month high of 135.23 yen in the previous session.
The US Dollar Index settled at 104.15, after rising 0.3% on Tuesday.
The rebound in US business activity comes on the back of a slew of recent resilient economic data pointing to a still tight labor market, steady inflation, and strong retail sales in the world’s largest economy.
Markets have since raised their expectations of how much higher the Fed will need to raise interest rates to tame inflation.
Investors’ focus now turns to the release of minutes from the latest Federal Reserve meeting later on Wednesday, which could offer more insight into policymakers’ deliberations and plans.
“It took more than two weeks, a slew of (of) hawkish comments and strong data, for markets to slowly wake up to the fact that the final interest rate is the most likely path for the Fed, and we’ll have to forget about cuts this year,” Simpson said of City Index.