As investors increased their bets that the Federal Reserve will hike rates in May, the dollar was poised to post its first weekly gain in over two months on Friday. In contrast, the euro was supported by an unexpected resurgence in the euro zone economy in April.
The dollar index, which compares the performance of the US dollar against six other currencies, increased 0.1% on the day and was on track to post its first weekly rise since late February of 0.4%.
This month, the euro zone’s recovery unexpectedly picked up speed as increased demand in the services sector made up for a worsening decline in manufacturing.
The two biggest economies in the area, Germany and France, exhibited the same trend in preliminary surveys.
The euro last traded at $1.0973 against the dollar, up from a session low of $1.0938. It gained 0.5% to 88.86 pence in relation to the pound.
However, the dominance of the dollar has been the topic this week. Fed officials have taken efforts to emphasise that since inflation is still uncomfortably high, rates must continue to rise.
Money markets indicate that traders anticipate a quarter-point increase in US interest rates next month, which in theory is positive for the dollar. However, this is likely to be rapidly followed by a series of rate cuts as the economy weakens, which restrained the US currency’s gains.