Investing.com – The U.S. dollar fell lower on Friday, giving back some of the previous session’s gains on strong retail sales, but remained on track for a third straight weekly gain.
At 04:35 ET (08:35 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.2% lower at 103.495.
Dollars in demand
The dollar rose to a more than 2.5-month high on Thursday after stronger-than-expected data that added to recent signs of continued resilience in the US labor market.
This has led traders to largely raise expectations for a 25 basis point cut by the Federal Reserve next month, a smaller cut than the US central bank started its rate-cutting cycle with in September.
The dollar also gained support on increased expectations that Republican candidate Donald Trump will win the presidency next month, given the likelihood of trade tariffs supporting the dollar.
“We still think a risk reduction on November 5 could lead to defensive flows into the dollar,” ING analysts said in a note.
Sterling boosted by retail sales
In Europe, yields rose 0.3% to 1.3049 after data released Friday showed Britain unexpectedly rose 0.3% in September, exceeding economists’ expectations for a 0.3% monthly decline.
Combined with stronger profits in July and August, third-quarter sales rose 1.9%, the biggest increase since mid-2021.
“Yet growth data is currently of secondary importance to the BoE. This week’s surprise decline in services inflation is more significant, suggesting that successive rate cuts are becoming increasingly likely,” ING said.
rose 0.1% to 1.0844, but the euro remains on track for a weekly loss of almost 1% in the wake of Thursday’s rate cut by the .
In fact, the dollar’s three-week gain of 3% against the euro is the sharpest rally since mid-2022.
The ECB cut rates by 25 basis points to 3.25%, following September’s measure – the first consecutive rate cut since 2011.
While this cut was widely expected, the faster pace of rate cuts points to a deteriorating economic outlook amid signs that inflation is increasingly under control.
Yuan helped by GDP data
fell 0.3% to 7.1037, with the pair retreating after hitting a nearly two-month high earlier this week.
China’s GDP grew at an annual rate of 4.6% as expected, albeit at a slower pace than in the previous quarter. Quarter-on-quarter growth fell slightly short of expectations, while year-to-date GDP was still below the government’s annual target of 5%.
The GDP data underlined the need for more economic support from Beijing. The Chinese government had unveiled a raft of stimulus measures over the past three weeks, including both monetary and fiscal measures, but a lack of clear details on the timing, implementation and scale of the planned measures limited optimism among investors.
fell 0.1% to 150.00, with the Japanese yen strengthening slightly after hitting a near three-month low earlier in the session.
Data shows inflation grew slightly more than expected in September, although it fell from a 10-month high the previous month.