# Dollar slips after upbeat China data; euro, pound rise
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-04-18
Category: TRADING
Category URL: https://financedigest.com/category/trading
Meta Title: Dollar Weakens as China Beats Forecasts, Boosts Sterling
Meta Description: Recent data showing strong growth in China leads to dollar weakening against major currencies, while UK pay figures support pound. Find out more.
URL: https://financedigest.com/dollar-slips-after-upbeat-china-data-euro-pound-risehtml

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By Herbert Lash and Samuel Indyk

NEW YORK/LONDON (Reuters) – The dollar fell against most major currencies on Tuesday after better-than-forecast growth data from China, while strong pay figures from Britain supported the pound.

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

Separate data on March activity in [China also showed retail sales](https://www.financedigest.com/bentley-cruises-to-record-sales-in-2022-despite-china-drop.html "Bentley cruises to record sales in 2022 despite China drop") 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.

The view on the [dollar getting a bit weaker](https://www.financedigest.com/deutsche-bank-equity-bear-market-rally-will-stretch-into-2023-dollar-weaker.html "Deutsche Bank: Equity bear market rally will stretch into 2023, dollar weaker") from here against the majors is predicated on a strong China,” said Thierry Wizman, Macquarie global FX & rates strategist in New York. “When you have the rest of the world doing well or better than U.S. in terms of activity … that’s usually bad for the dollar.”

Also driving dollar weakness is the likelihood disinflation already is occurring in the United States, a reason the Federal Reserve is going to pause hiking [interest rates](https://www.financedigest.com/ecbs-centeno-says-interest-rate-close-to-peaking-if-no-new-shocks.html "ECB’s Centeno says interest rate close to peaking if no new shocks"), Wizman said.

There’s a good chance that the [euro and Sterling](https://www.financedigest.com/sterling-gains-vs-euro-after-sausage-war-ceasefire.html "Sterling gains vs euro after ‘sausage war’ ceasefire") continue to do well,” he said. “It starts with the disinflation story in the U.S., which is something that people are not really latching on to.”

The euro rose 0.38% to $1.0968 after two consecutive daily declines of more than 0.5%, while the dollar index, a measure of the greenback against six major currencies, slid 0.362%. The index rose over 1% in the last two trading sessions.

[China’s offshore yuan rose 0.02% to $6.8824 per dollar](https://www.financedigest.com/stocks-advance-u-s-dollar-retreats-as-china-drops-quarantine-rule.html "Stocks advance, U.S. dollar retreats as China drops quarantine rule").

Britain’s pound jumped despite an unexpected [rise in the unemployment rate](https://www.financedigest.com/shares-slip-yields-rise-as-u-s-data-sparks-rate-hike-concerns.html "Shares slip, yields rise as U.S. data sparks rate hike concerns") in the three months to February as pay growth stayed higher than forecast, which could prompt the Bank of England to hike its interest rate again in May.

The surprise this year has been how strong the euro has been and Sterling, especially, given that we were coming out of the second [half of last year](https://www.financedigest.com/an-apple-a-year-half-of-iphone-users-will-upgrade-to-the-iphone-7.html "AN APPLE A YEAR: HALF OF IPHONE USERS WILL UPGRADE TO THE IPHONE 7") with a multitude of crises in Europe,” Wizman said.

Sterling was last trading at $1.2427, up 0.43% on the day.

Futures traders are pricing in an 83.4% chance of the Fed raising rates by 25 basis points at its next meeting in May, with traders still expecting rate [cuts toward the end](https://www.financedigest.com/hp-to-cut-about-12-jobs-by-end-of-fiscal-2025.html "HP to cut about 12% jobs by end of fiscal 2025") of the year.

Jim Caron, co-chief investment officer of the Global Risk Balanced Team at Morgan Stanley Investment Management, said after a hike in May the [Fed will keep rates in the 5%-5.25% range the entire year to ensure inflation](https://www.financedigest.com/wall-st-seen-steady-ahead-of-inflation-data-fed-later-in-week.html "Wall St seen steady ahead of inflation data, Fed later in week") remains under control.

What keeps the [Fed up at night is the fear that inflation](https://www.financedigest.com/stocks-tumble-dollar-rallies-as-soaring-u-s-inflation-implies-an-aggressive-fed.html "Stocks tumble, dollar rallies as soaring U.S. inflation implies an aggressive Fed") becomes unanchored” and doesn’t remain lower near the U.S. [central bank’s](https://www.financedigest.com/governments-and-central-banks-risk-inflation-bank-of-england-has-done-its-bit-now-the-politicians-turn.html "Governments and central banks risk inflation, Bank of England has done its bit, now the politicians’ turn") 2% target, Caron said. If it starts to percolate back up again, and it becomes unanchored, then that’s a [bigger problem.”](https://www.financedigest.com/uk-has-bigger-inflation-problem-than-us-or-euro-zone-boes-mann.html "UK has bigger inflation problem than US or euro zone – BoE’s Mann")

The U.S. central bank should continue raising rates on the back of recent data showing [inflation remains persistent while the broader economy seems poised to continue growing](https://www.financedigest.com/can-beijing-decouple-its-reopening-from-growing-inflation-in-2023.html "Can Beijing Decouple Its Reopening From Growing Inflation in 2023?"), even if slowly, St. Louis Fed President James Bullard told Reuters.

![](https://onlineworldnews.com/wp-content/uploads/2023/04/chart-1.jpg)

[Rates and inflation](https://www.financedigest.com/boes-bailey-speaks-about-surging-inflation-and-rate-hikes.html "BoE’s Bailey speaks about surging inflation and rate hikes") https://www.reuters.com/graphics/USA-FED/INFLATION/gkvlgnaywpb/chart.png

The dollar can remain sensitive to the strength, or not, of the [economic data](https://www.financedigest.com/big-data-suggests-leicesters-football-success-could-usher-in-economic-boom.html "Big data suggests Leicester’s football success could usher in economic boom") as the Fed likely nears the end of their tightening cycle,” said Kristina Clifton, an economist at Commonwealth Bank of Australia (CBA).

The Australian dollar rose 0.39% versus the greenback to $0.673 after Reserve [Bank of Australia (RBA) minutes showed the central bank considered an 11th consecutive rate hike](https://www.financedigest.com/the-recent-bank-of-england-meeting-the-biggest-rate-hike-recession-warning-and-the-fallout.html "The recent Bank of England meeting, the biggest rate hike, recession warning and the fallout") in April before deciding to pause.

The RBA, however, said it was ready to tighten further if [inflation and demand](https://www.financedigest.com/rising-demand-from-consumers-to-push-sales-of-inflatable-boat-market.html "Rising Demand from Consumers to Push Sales of Inflatable Boat Market") failed to cool.

The [yen strengthened 0.32% to 134.05 per dollar](https://www.financedigest.com/aussie-dollar-firm-as-bonds-tumble-yen-looks-past-boj.html "Aussie dollar firm as bonds tumble, yen looks past BOJ").

The Mexican peso lost 0.21% versus the dollar at 18.05 while the Canadian dollar fell 0.01% versus the greenback to 1.34 per dollar.

![](https://onlineworldnews.com/wp-content/uploads/2023/04/Pasted-image-1681815523393.jpg)

Dollar 18 aPRIL https://fingfx.thomsonreuters.com/gfx/mkt/gdpzqngxzvw/Pasted%20image%201681815523393.png

(Reporting by Herbert Lash, additional reporting by Samuel Indyk in London and Ankur Banerjee in Singapore; Editing by Marguerita Choy, Mark Potter and Jonathan Oatis)


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