Sterling rose in European trade for the third straight session against euro to three-week highs following data that showed the UK might avoid recession this quarter. 

Such data bolstered the case for upcoming policy tightening by Bank of England by nearly 50 basis points in March, and a potential rate hike in May.

EUR/GDP fell 0.9% to 0.8795, the lowest since January 31, with a session-high at 0.8887, after rising 0.1% yesterday, the second profit in a row following strong UK retail sales data. 

Strong Data

UK manufacturing PMI rallied to 49.2 in February from 47 in January, beating estimates of 47.5. 

UK services PMI rallied as well to 53.3 in February, the highest since June 2022, from 48.7 in January, and beating estimates of 49.2. 

Analysts pointed to stronger activities by private sector companies this months, ending six months of low production.

Analysis

Economists believe that  as the UK economy shows resilience, it bolsters the case for multiple more rate hikes by Bank of England this year. 

However the manufacturing PMI has to come above 50 if the economy is to avoid recession by a comfortable margin.

Gold prices declined in European trade for a second session on track for seven-week lows as dollar strengthens against major rivals. 

Dollar remains boosted by a recent series of strong US data, which bolstered the case for multiple more rate hikes by the Fed in the months to come.

Such data showcased the resilience of the US economy and raised estimates for a 0.5% rate hike in March. 

Prices Today

Gold prices declined 0.6% to $1,831 an ounce, after losing 0.1% yesterday, resuming the losses after a hiatus on Friday off seven-week lows at $1,818. 

The Dollar

The dollar index gained 0.5% today after a hiatus from gains off six-week highs at 104.66, against a basket of major rivals.

Recent strong US data showed how flexible and resilient the economy is, and increased expectations of more interest rate hikes to contain inflation.

Late today, we'll see important US data on major sectors for February, which are expected to boost the greenback even further.

 Recent data showed US consumer prices, producer prices, and retail sales rose past estimates in January, while unemployment claims tumbled unexpectedly. 

Fed Rates

Such data and bullish remarks by Fed officials increased pricing for a 0.25% rate hike in March to 100%, and pricing for a 0.5% rate hike in March from 9% to 21%. 

The Fed

Investors await the important Federal Reserve meeting minutes tomorrow to search for clues on the future path of policies. 

Markets now expected to Fed to increase rates above 5% by May, with a peak at 5.5% in July. 

The SPDR

Gold holdings at the SPDR Gold Trust remained flat yesterday at 919.92 tones, the lowest since early February. 

European manufacturing PMI fell to 48.5 in February from 48.8, missing estimates of 49.4, and remaining in shrinkage zone for eighth month in row. 

European services PMI grew to 53 in February, beating estimates of 51.00, and up from 50.8 in January.