The dollar was weaker against major currencies as investors continued to ignore solid US data, considering instead that further US interest rate hikes are already priced in. Yesterday saw a much stronger than expected ISM survey of US manufacturing activity, but the market chose instead to focus on the very strong equivalent index for the euro zone, pushing the euro up to a high of 1.2251 usd. "The dollar continues to show little reaction to positive data releases and with so much in the price the dollar may find it difficult to make further gains over the short term," said CALYON analyst Mike Carey. While the euro has room to make headway given that a good deal of bad news has been priced into the currency recently, two further interest rate hikes this year have already been priced into the dollar. The US rate outlook for 2006 is unclear, however, leaving little reason to push the dollar higher, he said. Analysts also cited the sell-off in European bonds and speculation of further reserve diversification by central banks away from the dollar -- after Russia yesterday raised the share of euros in its currency basket -- as factors supporting the euro. Elsewhere, sterling was also firm, tracking the euro's rise, despite a weaker-than-expected manufacturing PMI reported yesterday. HBOS analyst Steve Pearson noted that the UK report appears to have fallen out of line with purchasing managers indices reported globally, which have generally shown a marked improvement, leaving scope for improvement in future months. He also pointed to the recent fall in short sterling contracts -- an indicator of UK interest rate expectations -- suggesting that while a rate cut this Thursday may be a done deal, further rate cuts in the coming months are not. Today, attention will focus on the latest retail sales survey from the Confederation of British Industry. Last month saw the weakest reading on record and July is therefore expected to see some improvement, although today's survey will be the first indication of how retailers have fared in the wake of the July 7 terrorist attacks in London.