The US dollar rose slightly on Friday, but remained under pressure after a major interest rate cut by the Federal Reserve, while the British pound rose strongly after healthy UK retail sales data.
At 04:00 ET (09:00 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was up 0.2% at 100.480, but remained just above a 12-month low.
Dollar struggles to find buyers
The US dollar is struggling to find friends after the Federal Reserve began its rate-cutting cycle with a massive 50 basis point cut to a range of 4.75% to 5%.
Markets are pricing in a 40% chance that the Fed will cut rates by another 50 basis points in November, and cut them by 73 basis points by the end of the year. The rate is expected to reach 2.85% by the end of 2025, which is now seen as a neutral estimate by the Fed.
“But the big question facing the market now is whether the dollar is ready to break out of its two-year range,” analysts at ING said in a note. “There seems to be nothing on the agenda today that would justify a breakout, but suffice to say we are in the camp of looking for some strong follow-through selling if the 99.50/100 dollar index support levels break.”
The pound is rising this week.
In Europe, the pound rose 0.2% to 1.3312, with the pound rising more than 1% this week after reaching its highest levels since March 2022.
Data released earlier on Friday showed that UK gross domestic product rose by a stronger-than-expected 1% in August and growth in July was revised up to 0.7%, from a previous estimate of a 0.5% monthly increase.
China’s central bank kept its key interest rate at 5% on Thursday, after starting monetary policy easing with a 25 basis point cut in August.
Sterling rose 0.1% against the US dollar to 1.1163, up about 1% on the week and within striking distance of its August peak of 1.1201.
Interest rates were cut for the second time this year last week, but there is a degree of uncertainty about when the next move will be.
The consumer price index fell less than expected in August, falling 0.8% on an annual basis, less than the expected 1.0% decline.
Yen falls after BOJ meeting
The Australian dollar index rose 0.7% to 143.62 after the central bank kept interest rates steady and said it expected inflation and economic growth to rise steadily.
The Bank of Japan’s decision and outlook came just hours after consumer price index data showed inflation rose to a 10-month high in August, as rising wages pushed private consumption higher.
While the yen was suffering weekly losses, it was still close to its strongest levels for 2024, which it hit earlier in the week.
The pound fell 0.2% to 7.0538 after the People’s Bank of China kept its benchmark interest rate unchanged, defying some expectations that it would cut rates further to stimulate the economy.
The People’s Bank of China’s decision comes as a series of recent economic indicators have shown continued weakness in China.