The dollar rallied last night as US consumer sentiment increased and sales of existing homes performed better than expected. US data's better-than-expected performance, despite the Middle East tensions and record high oil prices, have led to an increase in expectations of a Federal Reserve rate hike.

Although home sales fell between June and July, they did not do so by as much as had been predicted. According to the Conference Board's index, consumer sentiment went up in July, despite analysts' predictions that it would fall from June's figures, further strengthening the feeling that a rate hike is possible.

David Durrant, chief strategist at New York's Julius Baer Investment Management, told Reuters: "What we're seeing here is a little relief rally in the dollar, based on a slight shift in expectations for the next Fed meeting."

Last night, the dollar was up 0.5 per cent, while the euro fell by the same figure to $1.2575.  Dollar rallies amid rate hike expectations