Investing.com – The U.S. dollar edged higher on Friday, on track to end a five-week losing streak ahead of key inflation data.
At 04:00 ET (09:00 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, was up 0.1% at 101.314, after rising to its highest level since Aug. 22 at 101.58 on Thursday.
Dollar on track for weekly gains
The dollar is on track for a 0.6% gain this week, its best week since early April, supported by continued signs of resilience in the U.S. economy, after GDP data showed the economy grew more than initially estimated in the second quarter.
However, the US currency is still on track to fall about 2.5% in August, which would be its worst month since November, as traders price in the Federal Reserve to begin its rate-cutting cycle.
Speaking at the Fed’s annual meeting last week, Fed Chairman Jerome Powell acknowledged the recent progress in inflation and said it was “time to adjust policy.”
Markets have taken this as a guarantee that interest rates will be cut at next month’s policy meeting, which would be the first such cut in more than four years.
However, controversy remains over the size of the cuts as well as the pace of future cuts.
The Fed’s preferred inflation gauge, the interest rate report, is due later in the session and could provide more insight into the debate.
Eurozone inflation slows
In Europe, the euro rose 0.1% to 1.1092, after the release of the euro zone consumer inflation index for August confirmed signs of slowing inflation.
Consumer prices rose 2.2% year-on-year in August, down from 2.6% the previous month and a 0.2% monthly gain.
The central bank began cutting interest rates in June, and a sharp drop in inflation is likely to prompt policymakers to cut them again next month.
Sterling rose 0.2% to 1.3188, close to its strongest level since March 2022, supported by expectations that the Bank of England will keep interest rates higher for longer than those in the United States and the euro zone.
Interest rates are expected to be cut by 25 basis points on August 1 to 5%, and money markets are pricing in an additional 40 basis points of cuts by the end of the year.
Yen nears recent highs
In Asia, the dollar held steady at 145.01, close to its lows hit in early August, during the height of pro-yen trading.
Data out of Tokyo showed inflation rose slightly more than expected in August, with core inflation returning to the Bank of Japan’s annual target of 2% amid improving private spending.
The reading reinforced the idea that rising inflation will give the Bank of Japan more room to raise interest rates further this year. The CPI reading also helped markets look past disappointing industrial production and retail sales data.
The US dollar index fell 0.1% to 7.0907, its lowest level since late December.
The yuan, along with broader Chinese markets, was supported by news that Beijing plans to refinance $5.4 trillion in mortgages — a boost to the property market, which is at the heart of China’s economic slowdown.
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