© Reuters. FILE PHOTO: US dollar banknotes are shown in this illustration taken on July 17, 2022. REUTERS/Dado Ruvic/Illustration
By Samuel Indyk and Ankur Banerjee
LONDON (Reuters) – The dollar fell against most major currencies on Tuesday after better-than-expected growth data from China, while strong wage numbers from Britain supported the pound.
Data on Tuesday showed that China’s gross domestic product grew 4.5% year-on-year in the first three months of the year, beating analysts’ expectations for a 4% expansion as the end of COVID-19 restrictions lifted the world’s second-largest economy. largest economy.
Separate data on March activity released on Tuesday also showed that retail sales growth accelerated to 10.6%, beating expectations and reaching the highest level in nearly two years, while factory output growth also accelerated but was just below expectations.
“Normally on a day when there is good data for Chinese activity, you get a nice rally in commodity currencies, EM currencies and the dollar will go lower, and we’re starting to see that,” said Chris Turner, ING’s head of global markets.
“Better Chinese data is usually seen as good news for the euro as well, given its large manufacturing sector,” Turner added.
The euro was last up 0.5% against the dollar at $1.0978 after two consecutive daily declines of more than 0.5%.
The currency index, which tracks the currency against a basket of currencies, fell 0.4% to 101.67, after rising more than 1% in the previous two trading sessions.
China was slightly higher at 6.877 per dollar.
The British Pound jumped despite an unexpected rise in the unemployment rate in the three months to February as wage growth remained higher than expected, which could prompt the Bank of England to raise interest rates again in May.
“The British pound enjoyed a modest rally from today’s data,” said Turner of ING.
“The earnings numbers surprised to the upside. On the margins, this supports a 25 basis point hike in May from the Bank of England.”
The pound was last up 0.5 percent against the dollar at $1.2438, ahead of Wednesday’s inflation data.
In the United States, data released on Monday showed confidence among single-family homebuilders improved for the fourth consecutive month in April, while manufacturing activity increased in New York state for the first time in five months.
Markets are pricing in a 90% chance that the Fed will raise interest rates by 25 basis points at its next meeting in May, with traders still anticipating a rate cut towards the end of the year.
“The dollar could remain sensitive to the strength of economic data, or not, as the Fed is likely to be nearing the end of the tightening cycle,” said Christina Clifton, an economist at the Commonwealth Bank of Australia (OTC:) (CBA).
The Australian dollar rose 0.6% to $0.6741 after minutes from the Reserve Bank of Australia (RBA) meeting showed that the central bank was considering its 11th consecutive interest rate hike in April before deciding to pause.
However, the RBA said it is ready for further tightening if inflation and demand fail to calm down.
said Abhijit Surya, an economist at Capital Economics Australia and New Zealand, who expects a final 25 basis point hike in could.
The dollar fell 0.3 percent to 134.02 Japanese yen, while it rose 0.5 percent to 0.6213 dollars.
(Graphic: Dollar April 18, https://fingfx.thomsonreuters.com/gfx/mkt/gdpzqngxzvw/Pasted%20image%201681815523393.png)