BERLIN — The euro recovered much of its strength against the U.S. dollar Wednesday, rebounding from a three-week low and crossing $1.37 in mid-afternoon European trading.

The 16-nation currency rose as high as $1.3739 before drifting back to $1.3724, 2 cents more than the $1.3523 it bought late Tuesday in New York trading.

The dollar was weakened by a spate of downbeat economic news out of the U.S. the day before, including reports showing that pending home sales fell to the lowest level on record and a continued decline in factory orders.

"A round of downbeat economic data out of the U.S. yesterday afternoon served to turn investor sentiment against the dollar," said James Hughes of CMC Markets in London.

The euro also managed to hold steady despite a moderate uptick in unemployment in Germany, Europe's biggest economy, too.

The Federal Labor Agency said that German unemployment rose to 7.4 percent in December from 7.1 percent in the previous month as the economic crisis began to bite.

The British pound rebounded, too, buying $1.5111 compared with $1.4939 on Tuesday, as analysts reiterated that the Bank of England was set to cut interest rates from 2 percent Thursday.

"It seems a stone dead certainty that the Bank of England will deliver another hefty interest rate cut on Thursday," IHS Global Insight economist Howard Archer said. He said the bank would likely lower the rate to 1.25 percent but did not rule out a 1 percentage point cut, either.

Britain has been hurt by plunging house prices and tightened lending between banks despite record interest rate cuts.

Cutting interest rates can undermine a currency as investors seek higher returns elsewhere.

In other trading, the dollar bought 92.54 yen in trading Wednesday compared with 94.01 Japanese yen late Tuesday in New York.