NEW YORK: The dollar was higher against the euro on Friday after data showed US business activity growth slowed in June but services kept humming along and as the US currency drew support from a bout of risk aversion driven by hawkish comments from global central banks.
US business activity fell to a three-month low in June as services growth eased for the first time this year and the contraction in the manufacturing sector deepened, closely watched survey data out Friday showed.
The overall picture, though, indicated US economic growth ticked up a notch in the second quarter even as worries persist that the Federal Reserve’s aggressive interest rate increases over the past year will trigger a recession.
Earlier in the session data showed euro zone business growth virtually stalled in June. A downturn in manufacturing deepened, while activity in the bloc’s dominant services sector barely expanded, as overall demand fell for the first time since January.
“We’re starting to see signals from businesses that the demand is starting to ease up at the margin and that’s leading to recalibration of expectations of what future output looks like,” said Bipan Rai, North America head of FX strategy at CIBC Capital Markets. “I do think that the concern with the future outlook is weighing on risk appetite right now and the dollar is catching somewhat bid off of that,” Rai said.
The euro fell 0.56 % to $ 1.0894, a three-day low against the US dollar. The dollar index, which measures the currency against six rivals, rose 0.48% to 102.88.
Traders squaring books as the end of the month and the quarter nears was also likely supporting the US currency, Rai said.
Friday’s data comes on the heels of rate hike surprises and hawkish comments from central banks globally which have renewed market fears that policymakers have further to go in tightening policy to tame inflation, even at the risk of tipping their economies into a recession.
Fed Chair Jerome Powell said on Thursday the central bank would move interest rates at a “careful pace” from here, but ruled out interest rate cuts “happening any time soon.” Against the yen, the dollar was up 0.34 % at 143.62 yen, its strongest level in more than seven months. The Japanese currency has come under renewed pressure as the Bank of Japan (BOJ) maintains an ultra-dovish stance.
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