Dollar Trades Slightly Higher on US Economic Data By Reuters

Written by Laura Matthews and Amanda Cooper

LONDON/NEW YORK (Reuters) – The dollar fell against sterling on Tuesday, but rose slightly against other currencies, after several encouraging economic data from US activity indicated the Federal Reserve would keep interest rates higher for longer.

* Business activity in the United States unexpectedly rebounded in February, reaching an eight-month high, according to a survey published today, rising to 50.2 from 46.8 in January.

* The report came on the heels of recent strong data on retail sales, the labor market and industrial production which indicated strong momentum for the economy earlier in the year.

“It’s becoming increasingly clear that the US is not in any kind of recession right now and there are no signs of a recession,” said Adam Patton, senior currency analyst at ForexLive in Toronto.

* “The market has largely reconsidered the possibility of a 2023 recession. The US economy has suffered higher rates so far and the chances are increasing that the Fed will raise interest rates to 6% by the end of the year.”

* The split between leading indicators of the US economy, which show that a recession is still looming, and other indicators that point to continued strong demand, is likely to keep the Fed cautious, according to Eric Nelson, macro strategist at Wells Fargo (NYSE: Securities in London).

The euro fell 0.34% to $1.0684, dragged down by a deterioration in manufacturing activity in the eurozone, although a recovery in the more inflation-sensitive services sector contained losses.

* The notable exception was the pound, which rose 0.56% to $1.2106, extending its two-day gains against the dollar.

* The dollar, which compares the greenback against a basket of six major currencies, rose 0.25% at 104.16, slightly lower than the high of 104.26 touched earlier in the day.

(Reporting by Tom Westbrook in Singapore; Spanish editing by Ricardo Figueroa and Carlos Serrano)