The Philadelphia Federal Reserve said on Thursday its barometer on US Mid-Atlantic business activity increased more than forecast in January, suggesting resilience in the region's manufacturing sector amid trade tensions between China and the United States. Weak euro zone data pulled the single currency lower.
Inflation data for the trade bloc showed price pressures receding further from the central bank's target, complicating the situation for the European Central Bank which currently expects to raise interest rates later this year. The single currency has fallen 1.7 percent over the last week, kicked off by reports that the German economy grew by 1.5 percent in 2018, the weakest rate of expansion in five years.
"Euro zone data has been quite disappointing and that is prompting the euro to underperform the struggling dollar in the opening weeks of the year," said Alvin Tan, a currency strategist at Societe Generale in London. The euro's weakness comes at a time when the dollar itself has struggled to gain momentum. On Jan. 10, the dollar almost fell below its 200-day moving average when the index touched a three-month low of 95.029. Since then it has rebounded but is still down 0.1 percent so far this month.
The British pound rose to a two-month high against the euro on Thursday, extending recent gains on growing expectations that Britain can avoid a no-deal withdrawal from the European Union. The pound also firmed towards a two-month high against the dollar. It was trading 0.3 percent up at $1.292, inching towards a mid-November high of $1.293.