© Reuters
Investing.com – The US dollar fell in early European trade on Friday but was on track for its third straight weekly gain as expectations of a US interest rate hike grew.
At 03:15 EST (07:15 GMT), the greenback, which measures the greenback against a basket of six other currencies, was down 0.1% at 104.040, just below Thursday’s two-month high of 104.31.
Despite the slight losses on Friday, the greenback is still on track for its third weekly gain in a row, of just under 1% as traders weigh in on the possibility that US interest rates will remain elevated for longer.
Data released Thursday showed that the number of Americans who filed increased moderately last week to 229,000, while first-quarter growth was revised higher to 1.3% from 1.1%.
Attention Friday will be on the release of a closely watched inflation gauge, which the Fed will watch closely as it heads into its June policy meeting.
With inflation holding steady, expectations are now rising that rates will rise again in June, with futures traders split almost evenly between expecting a rate hike and a pause.
The dollar also received a boost this week, given its safety, from the failure to reach an agreement to raise the $31.4 trillion US government debt ceiling, as the early June deadline approaches.
Reuters reported late Thursday that the two sides appeared to be close to reaching an agreement, but that any deal would have to be approved by the Republican-controlled House of Representatives and the Democratic-controlled Senate.
Elsewhere, it rose to 1.0731, staying close to a two-month low, even as officials hinted at more rate hikes to tame soaring inflation.
“In order to eradicate the specter of inflation, we acted decisively in the European system,” German central bank chief Joachim Nagel said Thursday. “The ECB Governing Council will continue on this path of monetary tightening to overcome high inflation.”
It rose 0.2% to 1.2344 after Britons rose more-than-expected in April, up 0.5% from March, above expectations of 0.3% and improving from a 1.2% drop in the previous month.
With the G7 remaining high, jointly with Italy, and consumer spending showing a degree of resilience, it is likely to raise interest rates again next month.
It fell 0.2% to 139.78, off a six-month high, with weaker-than-expected data on Friday raising expectations that the Bank of Japan will halt policy tightening this year.
It rose 0.3% to 0.6522, while it fell 0.4% to 7.0524, rebounding from a nearly six-month high, but still well above the key 7 level.