FOREX-Dollar gains as U.S. data make more Fed rate cuts unlikely

(New throughout; changes dateline, previous LONDON)
By Kate Duguid
NEW YORK, Dec 18 (Reuters) - The U.S. dollar rose on
Wednesday as strong economic data decreased the chances the
Federal Reserve would continue its rate-cutting cycle in 2020.
Industrial production rebounded in the United States in
November, mainly because a strike by General Motors Co GM.N
workers ended. Housing starts and building permits were both
reported to have grown more than expected and October JOLTS job
openings were better than forecast, suggesting that the U.S.
labor market remains strong.
Expectations the Fed will cut rates from the current 150-175
basis point level are 2.2% for the January meeting, 4.3% for
March and 12% for April, according to CME Group's FedWatch tool.
The same tool shows a 50% chance that rates will remain at
current levels through December 2020.
"Bottom line: the U.S. economy remains on solid footing even
as the rest of the world struggles," wrote analysts at Brown
Brothers Harriman.
The dollar rose against the euro EUR= by 0.23% to $1.112.
The single currency has struggled to stay above its 200-day
moving average of $1.115. The dollar was also 0.39% higher
against the pound GBP= to $1.308, which has lost all its
election gains on fears Britain could leave the European Union
without a trade deal.
The dollar index .DXY "is up two days in a row for the
first time since the last week of November, and has recouped
over a third of its December swoon. Sterling is testing the Dec.
12 low near $1.3050 and a break below would set up a test of the
November 22 low near $1.2825," the Brown Brothers Harriman
analysts wrote.
German business morale rose more than expected in December,
a survey showed on Wednesday, another sign that a manufacturing
slump in Europe's largest economy may be bottoming out after
overall output shrank earlier in the year. The data, however,
failed to help the falling euro. U.S. Trade Representative Robert Lighthizer said the United
States may raise tariffs on European goods as it tries to shrink
its chronic trade deficit with the continent, re-igniting
worries about the export-driven euro.
The normally sleepy Hong Kong dollar HKD= hit a five-month
high, roused into its sharpest rally in a year by investment
flows from China, cooling unrest and a global unwinding of long
positions in the greenback. It remained slightly off its July
high of 7.7822; it will hit a 2-1/2 year high if it breaks below
that level.