"It was kind of an issue of relativities in a sense, that while the services sectors performed better across the board, that extra lift that sterling got was because of that very, very strong performance," said Rodrigo Catril, senior currency strategist at National Australia Bank. "I think the euro is still in a sort of more difficult situation, given that there's a general sense that the ECB still has more work to do, and that puts a little bit of strain in terms of their growth outlook." Over in the antipodes, the kiwi was last 0.1% higher at $0.62195, after having risen to an intra-day high of $0.6248 earlier in the session following a hawkish rate hike from the Reserve Bank of New Zealand (RBNZ). The RBNZ on Wednesday raised its cash rate by 50 basis points, as expected, and signalled further tightening as inflation in the economy remains too high.
"Upside pressures to inflation prevail, so unless the wheels fall off the economy soon, another 50bp hike seems likely at this stage," said Matt Simpson, senior market analyst at City Index.
"But its timing could be dictated by the immediate impact of Cyclone Gabrielle."
The Aussie slumped 0.31% to $0.6835, pressured by Wednesday's data showing that Australian wages grew at the fastest annual pace in a decade last quarter, but remained short of market forecasts. That could lessen the pressure for further aggressive hikes in local interest rates. Against the Japanese yen , the dollar slipped marginally to 134.91, after rising to a two-month high of 135.23 yen in the previous session. The U.S. dollar index stood at 104.15, having gained 0.3% on Tuesday. The rebound in U.S. business activity comes on the back of a recent slew of resilient economic data pointing to a still-tight labour market, sticky inflation and robust retail sales in the world's largest economy. Markets have since raised their expectations of how high the Federal Reserve would need to lift rates to tame inflation. Investors' focus now turns to the release of the minutes from the Fed's latest meeting later on Wednesday, which could offer more insight into policymakers' deliberations and plans.
"It has taken over two weeks, a plethora (of) more hawkish comments and strong data, for markets to slowly wake up to the fact that a higher terminal rate is the more likely path for the Fed, and for us to forget about cuts this year," said City Index's Simpson.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ World FX rates ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting by Rae Wee Editing by Shri Navaratnam and Kim Coghill)
