The US dollar rose slightly on Thursday, but remained close to seven-month lows after benign inflation data, while sterling rose after strong growth data.
At 05:45 ET (09:45 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was up 0.1% at 102.452, just above levels last seen in January.
Dollar falls ahead of retail sales
The US dollar has been on the back foot for much of this week, with data released on Wednesday showing it rose moderately in July, in line with expectations, and the annual rise in inflation slowing to below 3% for the first time since early 2021.
The figures came in lower than expected earlier in the week, suggesting that inflation is on a downward trend, which would give the US Federal Reserve enough room to start cutting interest rates.
The central bank is scheduled to hold its next meeting in September, and is widely expected to cut interest rates, although debate continues over the size of the initial cut.
The next data point is US retail sales later in the session, which is expected to be of great interest as consumption accounts for about two-thirds of US economic growth.
The report is expected to show monthly growth of 0.4%, a slight improvement from the previous month’s flat reading.
The Federal Reserve has kept its benchmark overnight interest rate in the current range of 5.25% – 5.50% since last July, after raising the interest rate by 525 basis points since 2022.
Sterling rises after UK growth data
In Europe, the pound rose 0.2% to 1.2845, after data showed the UK economy grew by 0.6% in the second quarter of 2024, building on a rapid recovery of 0.7% in the first quarter of the year.
The UK economy has been growing slowly since the Covid-19 pandemic, growing by just 2.3% between the fourth quarter of 2019 and the second quarter of 2024.
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 fell slightly to 1.1011, but remained close to the previous session’s high of 1.1047, its highest level this year.
The central bank began cutting interest rates in June, and many expect policymakers to agree to another cut in September.
Yen steady after GDP release
In Asia, the dollar rose 0.1 percent to 147.43, with the yen steady after data showed Japan’s economy grew more than expected in the second quarter, helped by a rebound in private consumption as Japanese wages grew.
The reading is in line with the Bank of Japan’s expectations that improving wages will boost the Japanese economy, giving the central bank more room to continue raising interest rates this year.
The dollar rose 0.3% against the Japanese yen to 7.1587, with the yuan weakening as a batch of readings presented a mixed picture for the Chinese economy.
China’s economy grew faster than expected, raising some confidence that consumer spending and inflation are improving.
But fixed-asset investment growth was lower than expected, and investment in China unexpectedly rose to 4.2%.
The readings showed that while some policy measures taken by Beijing have helped support consumer spending, the overall economy remains under pressure.