The U.S. dollar stabilized on Friday after experiencing losses in the previous session due to disappointing job data, while the pound strengthened following better-than-expected growth figures.
The Dollar Index, which measures the greenback against a basket of six other major currencies, was slightly higher at 105.115 at 04:10 ET (08:10 GMT).
The dollar’s stability on Friday came after a minor week of gains, rebounding from losses incurred on Thursday following the release of data revealing a larger-than-expected increase in weekly jobless claims. This data suggesting a cooling U.S. labor market reinforced expectations that the Federal Reserve could initiate interest rate cuts by September.
However, concerns over persistent inflation continue to weigh on the Fed’s decision-making process. San Francisco Federal Reserve President Mary Daly emphasized the considerable uncertainty surrounding future inflation trends during remarks on Thursday. She highlighted that any adjustment in interest rates would be contingent on the trajectory of inflation and the performance of the labor market.
The upcoming release of consumer price index data, scheduled for next week, is expected to provide further insights into the Fed’s future interest rate decisions.
In Europe, the GBP/USD pair gained 0.1% to reach 1.2534, recovering from its recent lows. This recovery was driven by the release of data indicating that Britain’s economy expanded by the most in nearly three years during the first quarter of 2024. The 0.6% growth in gross domestic product marked the strongest performance since the fourth quarter of 2021, signaling the country’s emergence from the recession experienced in the latter half of the previous year.
Despite the Bank of England’s decision to maintain interest rates at a 16-year high on Thursday, the Monetary Policy Committee’s split vote hinted at a potential future rate cut, reflecting the central bank’s evolving stance.
Meanwhile, EUR/USD traded largely unchanged at 1.0783, with minimal market-moving data. The European Central Bank is expected to announce a rate cut on June 6, although uncertainties persist regarding the extent of further rate adjustments this year.
In Asia, USD/JPY rose 0.2% to 155.70, surpassing its recent lows. Traders are closely monitoring the 160 level, considering it a crucial threshold for potential Japanese government intervention.
USD/CNY increased by 0.1% to 7.2249, with the yuan weakening amid reports suggesting that U.S. President Joe Biden was contemplating imposing fresh sanctions on specific Chinese industries, such as electric vehicles and batteries. These potential measures could escalate tensions between the world’s two largest economies, impacting currency markets.
Overall, market participants are attentive to various economic indicators and geopolitical developments, which could influence currency movements in the coming weeks.