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NEW YORK, May 25 (Reuters) - The dollar strengthened for a fourth straight session on Thursday against a basket of major peers to touch a two-month high, as U.S. data pointed to a resilient economy even after an aggressive rate hike cycle by the Federal Reserve.

Weekly initial jobless claims rose by 4,000 last week to 229,000, below the Reuters estimate of 225,000 while data from the prior week was revised sharply lower, an indication the labor shows little signs of cracking.

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The second estimate of first-quarter gross domestic product growth confirmed the economy grew more slowly, but the increase was revised up to 1.3% from an initial 1.1%.

"We are definitely not seeing that recession that everybody was talking about coming in 2023, so with those kind of bets being pulled off, the rates are creeping higher at this point," said Erik Bregar, director, FX & precious metals risk management at Silver Gold Bull in Toronto.

"It's not permanently baked into the cake but if we can creep up towards 60% or 70% odds of a hike, we will probably go again in June."

"The momentum is definitely on the dollar's side," he added. "I don't want to jinx it, but it is not something I would want to step in front of right here. There is a lot of momentum behind it."

In contrast the German economy, Europe's largest, was in recession in the first quarter as GDP fell 0.3%, sending the euro lower. The dollar hit a two-month peak, getting additional support from safe-haven demand as worries mounted about a U.S. default.

The dollar index rose 0.433% at 104.280 after hitting 104.31, its highest since March 17. The four-day streak of gains would mark the longest since late February.

The euro was down 0.31% to $1.0715.

The probability of a 25 basis point rate hike from the Fed at its June meeting is about 53%, according to CME's Fedwatch Tool, up from about 36% on Wednesday.

Recent comments from Fed officials have indicated members are divided about whether to keep hiking rates or not. Boston Federal Reserve President Susan Collins said on Thursday it may be time for the U.S. central bank to pause its rate hike cycle while Richmond Fed president Tom Barkin said the Fed is in a "test and learn" situation in slowing inflation.

Worries about a potential U.S. default have supported the dollar recently as talks continue in Washington to raise the $31.4 trillion debt ceiling. The Treasury has warned it will be unable to pay all its bills on June 1 if the limit is not increased.

After days of negotiations, U.S. President Joe Biden and top congressional Republican Kevin McCarthy appeared to be nearing a deal to cut spending and raise the limit, with the two sides about $70 billion apart.

Fitch put the United States' "AAA" debt ratings on negative watch, a precursor to a possible downgrade should lawmakers fail to reach an agreement. In addition, credit rating agency DBRS Morningstar put the U.S. on review for a downgrade on Thursday.

The Japanese yen weakened 0.52% versus the greenback to 140.16 per dollar, while Sterling was last trading at $1.2311, down 0.43% on the day.

Reporting by Chuck Mikolajczak; Editing by Richard Chang