Investing.com – The U.S. dollar fell on Friday, giving up some of the previous session’s big gains after strong retail sales data eased concerns about an impending recession in the United States.
At 05:15 ET (09:15 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was down 0.1% at 102.725, after rising 0.4% overnight, its biggest daily gain in four weeks.
Jackson Hole May Move Dollar Sentiment
Benign inflation data this week suggested that the US Federal Reserve may start cutting interest rates at its next meeting in September.
But a stronger-than-expected release in July eased concerns that the central bank was lagging behind and would have to cut interest rates sharply to prevent a recession.
This helped the dollar recover from losses it suffered earlier this week, although it is still on track to end the week lower.
“The data has pushed investors to price in a 25bp rate cut by the Fed on September 18. However, there will be a myriad of data inputs into the Fed equation, and the calendar of events will accelerate next week,” analysts at ING Bank said in a note.
The highlight of next week will be the Federal Reserve’s annual Jackson Hole symposium, where Chairman Jerome Powell will have the opportunity to guide markets ahead of the Fed’s next policy-setting meeting.
The central bank has kept its benchmark overnight interest rate at the current range of 5.25%-5.50% since last July, after raising the interest rate by 525 basis points since 2022.
Sterling supported by retail sales
In Europe, the pound rose 0.3% to 1.2891, after data showed Britons’ incomes rose in July, recovering from a disappointing June.
The Office for National Statistics said retail sales volumes rose by 0.5% in July after falling by 0.9% in June and were 1.4% higher than a year earlier.
The central bank cut interest rates for the first time in more than four years in early August, but doubts remain over whether the central bank will agree to further rate cuts this year.
Sterling rose 0.1% against the US dollar to 1.0981, rebounding from a 0.4% decline in the previous session, but still close to its highest level this week at 1.1047, its highest level this year.
The yen is rising slightly.
In Asia, the Japanese yen fell 0.4% to 148.75, with the pair remaining near the 150 level, after falling to 141 yen last week amid a decline in risk-driven global markets.
However, the outlook for the yen looked strong, especially after data released this week showed that the Japanese economy is starting to recover thanks to rising wages. The strength of the economy is expected to give the Bank of Japan more room to raise interest rates further.
The US dollar fell 0.1% to 7.1673, with the yuan slightly firmer although a batch of mixed economic readings on China did little to improve sentiment towards the yuan, as did assurances of more stimulus measures from Beijing.
Focus now turns to the People’s Bank of China’s decision on its benchmark interest rate next week, after the bank unexpectedly cut rates in July.
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