(Updates throughout, includes PMI data, reaction and comment)
By Amanda Cooper
LONDON, Feb 21 (Reuters) - The euro stayed under
pressure on Tuesday 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 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.
Wage inflation is typically longer-lasting in the services
sector and robust activity there would suggest the European
Central Bank might be more likely to raise interest rates -
thereby supporting the euro, he said.
The euro was last down 0.2% on the day against the dollar at
$1.0667. It has lost nearly 2% in value against the U.S.
currency in February so far. But this is something of an
outlier. Against the Japanese yen , it has risen
1.4%.
The U.S. dollar index has gained nearly 2% so far in
February, putting it on track for potentially its strongest
monthly performance since September's 3.2% rally. It is
currently trading around 104, below Friday's six-week high of
104.67.
"The data momentum has been positive of late but it’s going
to be hard for the next few months to assess where we should be
at this stage of the cycle," Deutsche Bank strategist Jim Reid
said.
"There has no doubt been big improvements from gas price
falls and loosening of financial conditions but we’re yet to see
anything close to the full lag of monetary policy filter through
to the U.S. and Europe," he said.
U.S. manufacturing data is due later on Tuesday, while
Friday's core personal consumption expenditures index - the
Federal Reserve's preferred gauge of price pressures - could
shed more light on what might happen with interest rates this
year.
Against the yen, the dollar was up 0.23% at 134.6 ,
while against the Australian dollar it rose 0.4% to
$0.68875, even after Reserve Bank of Australia minutes showed
policymakers did not consider pausing hikes at February's
meeting.
Sterling reversed course and rose 0.3% against the
dollar to $1.2071 and rallied 0.5% against the euro to 88.36 pence, after data showed UK business activity was far
healthier than expected in early February.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
World FX rates ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Additional reporting by Tom Westbrook in Singapore; Editing by
Barbara Lewis and Susan Fenton)
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.