Dollar pauses for breath as China GDP beats estimates

The dollar slipped on Tuesday after a sharp rise overnight as strong U.S. economic data reinforced expectations that the Federal Reserve will hike interest rates in May, while China’s economic recovery gathered pace in the first quarter.

The dollar index , which measures the currency against six major rivals, eased 0.078% to 102.01, after rising 0.5% overnight.

China’s gross domestic product (GDP) grew 4.5% year-on-year in the first three months of the year, data showed on Tuesday, beating analyst forecasts for a 4% expansion as the end of COVID-19 curbs lifted the world’s second-largest economy out of a slump.

Separate data on March activity also released on Tuesday showed retail sales growth quickened to 10.6%, beating expectations and hitting a near two-year high, while factory output growth also sped up but was just below expectations.

OCBC currency strategist Christopher Wong said it was quite an encouraging report, with retail sales, GDP and property sales all higher than expected, reinforcing that post-pandemic recovery momentum remained intact.

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