The dollar held near six-week highs on Tuesday, as the euro came under pressure after data showed euro zone manufacturing activity deteriorated this month, although a rebound in the more inflation-sensitive services sector kept losses in check.
The pound headed for its largest one-day gain in five weeks against the euro, after a surprisingly strong read of UK business activity.
The euro has been struggling against the dollar in particular over the past couple of weeks, after strong U.S. labour data and signs of persistent inflation have raised the chances that U.S. interest rates will rise further than many previously anticipated.
S&P Global’s flash Composite Purchasing Managers’ Index (PMI) for the euro zone, seen as a good gauge of overall economic health, rose to its highest in nine months.
An index of service sector activity rose to its highest since June, while manufacturing declined at a sharper pace this month, according to Tuesday’s survey.
“Certainly the manufacturing numbers are disappointing, but what I would say is the services numbers are reasonably constructive,” CIBC Capital Markets global head of currency strategy Jeremy Stretch said.
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