Investing.com – The US dollar rose to new highs on Friday as the Federal Reserve appeared more hawkish than its European peers, while the British pound continued to decline.
At 05:00 EDT (09:00 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was up 0.1% at 105.365, not far from last week's peak of 105.80.
The dollar is supported by a relatively hawkish Federal Reserve
Demand for the US currency was constant even with data indicating a slowdown in the economy.
The latest numbers in the housing and labor markets were weak, and the next data, due later in the session, is expected to show a slowdown in activity.
However, Fed officials continue to call for caution and issue more data before agreeing to cut interest rates, and the US central bank's latest meeting saw expectations for rate cuts this year cut to one from three previously.
In contrast, the Fed began cutting interest rates earlier this month, has cut rates twice, and appears poised to begin cutting rates in August.
“The surprise rate cut by the Swiss National Bank and the dovish stance of the Bank of England reinforced the idea that central banks in Europe are far outpacing the Fed on interest rate cuts, which is a positive development for the dollar,” analysts at ING said. In a note.
Sterling weakens as August cut approaches
The British pound fell 0.1% to 1.2652, with the pound approaching a five-week low following the Bank of England's latest policy meeting.
The Bank of England kept interest rates unchanged, but some policymakers said the decision not to cut was “well balanced,” raising expectations that policymakers will agree to a cut when they next meet at the beginning of August.
The pound was supported somewhat on Friday by data showing a sharp jump in Britain last month after heavy rains kept shoppers away in April. Sales volumes rose 2.9% in May, compared to a revised 1.8% decline in April.
The index fell 0.1% to 1.0692, after falling about 0.4% during the previous session, with weak economic data adding to political concerns in the region.
Business growth in the euro zone slowed sharply this month, as industry in the bloc showed some signs of weakness while the contraction took a turn for the worse.
The preliminary reading for the region, compiled by Standard & Poor's Global, fell to 50.8 this month from 52.2 in May, beating expectations in a Reuters poll for a rise to 52.5.
“With dovish signals from the ECB's main European counterparts (BoE and SNB) and investors' nerves continuing to fray over financial and political developments in the EU, the euro is understandably under some pressure in the latter half of this week,” ING added. .
The yen falls to its lowest level in eight weeks
In Asia, the pair traded 0.1% lower at 158.81, with the pair retreating slightly after earlier rising to a new eight-week high above 159.
The Japanese currency remained on the defensive after the Bank of Japan's decision last week to postpone reducing bond-buying incentives until its meeting in July.
The US Treasury Department on Thursday added Japan to the list of countries it is monitoring for possible designation as a currency manipulator, following the Bank of Japan's aggressive intervention to prop up the yen, which has fallen to a 34-year low.
Shares traded higher at 7.2611, with the Chinese yuan remaining under pressure amid doubts about the strength of the country's economic recovery.
