Investing.com – The U.S. dollar rose on Friday but was on course for a weekly loss after core inflation eased, while the pound retreated after weak retail sales data.
At 04:30 ET (09:30 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.1% higher at 108.930, but was set for a decline of about 0.5% in the week, which would end a six-week winning streak.
Dollar set for weekly loss
The dollar retreated this week after lower-than-expected data raised the prospect of easier monetary policy this year, even as policymakers at the Federal Reserve signaled they would be cautious in their approach to cutting interest rates this year.
The Fed governor said on Thursday that three or four rate cuts are still possible if economic data weakens further.
“The perception at the end of a busy week in macro news is that optimism around a slowdown in core inflation on a monthly basis is cautious at best,” ING analysts said in a note.
“Inherently forward-looking markets are taking Trump’s inflation policy into account from a starting point that is already well above target. So, despite the stretched positioning and near-term overvaluation, the dollar continues to avoid the real catalysts for a correction.”
Sterling falls after fall in retail sales
In Europe, it traded 0.4% lower at 1.2197 after the British unexpectedly fell in December, down 0.3% on the month in December after a downwardly revised 0.1% rise in November, raising the risk of economic contraction in the fourth quarter.
Data released earlier this week showed that the British economy barely returned to growth in November.
It is expected to cut interest rates in February, with two rate cuts in 2025 largely priced into the market.
it fell slightly to 1.0300, ahead of the announcement of the eurozone’s final figure for December.
“EUR/USD seems to have found a short-term anchor at the 1.0300 handle. This is a level that includes a 2.5-3% risk premium (i.e. undervaluation), which we suspect will not be significantly reduced until there is more clarity on Trump’s protectionist policies,” ING added.
Yen nears one-month high
In Asia, it climbed 0.3% to 155.79, near its strongest level in nearly a month.
The yen rallied sharply this week as several Bank of Japan officials suggested a rate hike is possible when the central bank meets next week.
traded 0.1% lower at 7.3289, after hitting its highest level in more than a year this week.
China grew 5.4% in the fourth quarter, beating expectations of 5%, as a raft of recent stimulus measures bore fruit.
