Investing.com - The U.S. dollar firmed up against a currency basket on Monday after data showing a slowdown in U.S. wage growth in January dampened expectations for a faster rate of interest rate hikes this year, while sterling fell to one-week lows.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, rose 0.29% to 99.98.
The dollar posted its fourth straight weekly decline on Friday after the latest U.S. employment report showed that while jobs growth beat expectations last month wage growth remained tepid.
The slowdown in wage growth looked likely to prompt the Federal Reserve to adopt a more cautious approach on raising interest rates.
According to Investing.com's Fed Rate Monitor Tool less than 10% of traders expect the Fed to raise interest rates at its next meeting in March. The chance of a June increase is seen at just below 50%.
The Fed, which last hiked rates in December, has forecast three rate hikes this year.
Last week, the Fed stuck to its view that the economy is strengthening, but gave no clear signal on the timing of its next rate hike as officials wait to assess the possible economic impact of the Trump administration’s protectionist policies and recent remarks about currencies.
The greenback has been hard hit by concerns that a preference for a weak dollar could have a prominent role to play in Trump's 'America First' agenda.
The dollar was lower against the yen, with USD/JPY down 0.18% at 112.45, not far from last Thursday’s lows of 112.04, the weakest since November 30.
Sterling fell to one-week lows, with GBP/USD hitting 1.2450 before pulling back to trade at 1.2473.
The pound came under pressure as a parliamentary debate on a law giving Prime Minister Theresa May the right to trigger Brexit got underway.
The dollar gained ground against the euro, with EUR/USD falling 0.43% to 1.0736.
In the euro zone, data on Monday showed that German factory growth hit a two-and-a-half year high in January, with factory orders jumping by 5.2%. It was the strongest increase since January 2014.
Another report showed that investor sentiment in the euro area deteriorated slightly in February, amid concerns that the Trump administration’s policies will act as a drag on global growth.
The Australian dollar slid lower after disappointing domestic retail sales data, with AUD/USD down 0.23% at 0.7662.