Investing.com – The U.S. dollar rose slightly in early European trading Friday, recovering from the previous session’s losses ahead of key inflation data that could drive future interest rate expectations.
At 04:30 ET (08:30 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, rose 0.1% to 104.735, after falling overnight to 104.63.
The dollar fell after weak GDP data
The dollar retreated on Thursday after official data showed the greenback grew at an annual rate of 1.3% in the first quarter, lower than the previous estimate of 1.6%.
This sign of slowing growth caused markets to price in a 55% chance of rate cuts in September, up from 51% a day earlier, according to CME Group’s (NASDAQ:) FedWatch Tool.
However, inflation remains a concern for the Federal Reserve, with many officials warning against expectations of early rate cuts.
Lorie Logan, president of the Dallas Federal Reserve Bank, said Thursday that while she believes inflation is still heading toward the Fed’s 2% target, it is still too early to consider cutting rates.
With this in mind, traders are awaiting confirmation from Friday’s data, the Fed’s favorite inflation gauge, for confirmation that inflation remains persistent.
The euro falls after weak German retail sales
In Europe, it traded 0.1% lower at 1.0823 after falling more than expected in April, down 1.2% from the previous month.
This illustrates the difficulties consumers are facing in the eurozone’s largest economy as it prepares for a rate cut next week.
However, there is uncertainty about what the central bank will decide next in terms of interest rates, bringing eurozone inflation figures into sharp focus later in the session.
Inflation is expected to rise 2.5% this year, up from 2.4% the month before, but there is upside potential given stronger-than-expected April inflation for Germany on Wednesday.
fell 0.2% to 1.2712, down for the first time since March 21 from 1.2801 on Tuesday.
Japan’s CPI remains weak
In Asia, trading rose 0.3% to 157.23, recovering after a sharp decline in overnight trading.
Data from Tokyo showed inflation in the Japanese capital grew as expected in May, although it still remained relatively weak. Soft inflation is a bad omen for the yen, as it gives the Bank of Japan less incentive to raise rates.
traded 0.2% higher at 7.2438, returning to a six-month high hit earlier this week.
Data from the Purchasing Managers’ Index shows that Chinese business activity deteriorated in May, after some improvement in the past two months. unexpectedly fell back into contraction territory, while the non-manufacturing PMI grew slower than expected.
While the data provided new headwinds for the Chinese economy, they also fueled bets on higher stimulus spending from Beijing to support growth. But this spending, which is likely to bring about an easing of monetary conditions, likely does not bode well for the yuan.
