The U.S. dollar dipped slightly Friday, consolidating after the previous day’s sharp advance ahead of the release of the Federal Reserve’s favored inflation indicator.
At 03:00 ET (08:00 GMT), the Dollar Index, which tracks the greenback against six major currencies, slipped 0.1% to 98.090, following a 0.6% jump in the prior session. The index is on track to post a 0.8% gain this week, its largest weekly rise since the week ending August 1.
PCE Data in Focus
The dollar surged Thursday after stronger-than-expected U.S. economic data reinforced the view that the world’s largest economy remains robust despite higher borrowing costs, limiting market bets on aggressive Fed easing in the near term.
The Commerce Department revised second-quarter GDP growth up to an annualized 3.8% from 3.3%, citing resilient consumer spending and a narrower trade deficit. Weekly initial jobless claims also fell for a second consecutive week, dropping to 218,000 from 232,000, well below the one-year moving average of 227,000.
“The dollar hadn’t had such a slew of good data in a while, and positioning squeezes likely helped the move,” said analysts at ING, in a note. “But we think more good news is needed to keep the dollar going, and we see substantial risks of a correction today after a USD rally that looks slightly overdone.”
Investors are now awaiting the Fed’s preferred inflation measure, the personal consumption expenditures price index (PCE), for clearer guidance on the future path of policy.
“We expect 0.2% MoM, in line with expectations. That could be enough to bring the pricing for December Fed easing back into the 40-45bp area (now 39bp),” ING added.
Euro Trades in Narrow Range
In Europe, EUR/USD inched 0.1% higher to 1.1673, trading within a narrow band.
“Our baseline view is for the dollar to give back some gains, and we think a return above 1.170 can happen as early as today,” ING noted.
Traders are also weighing U.S. President Donald Trump’s announcement of broad new import duties, including 100% on branded pharmaceuticals, 25% on heavy-duty trucks, and 50% on kitchen cabinets.
GBP/USD remained largely unchanged at 1.3348, while USD/CHF was flat at 0.7999 after the Swiss National Bank left its key interest rate at zero on Thursday, as widely anticipated. This was the first hold in seven meetings following the SNB’s rate cuts that began in March 2024.
Asia-Pacific Moves
USD/JPY fell slightly to 149.83 but is on track for a weekly gain exceeding 1%, after Tokyo reported headline CPI rising 2.5% year-on-year in September, unchanged from August. Core CPI, excluding fresh food and energy, eased to 2.5% from 3.0%. The softer underlying inflation supports expectations that the Bank of Japan will proceed cautiously on further rate hikes, favoring gradual policy normalization.
USD/CNY traded mostly flat at 7.1345, while AUD/USD dipped 0.1% to 0.6531, on course for a weekly loss of nearly 1%.
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