The U.S. dollar edged higher on Friday, consolidating recent gains after Federal Reserve Chair Jerome Powell’s hawkish comments earlier in the week, while the euro also advanced in the wake of the latest European Central Bank meeting.
At 05:10 ET (09:10 GMT), the Dollar Index — which measures the greenback against six major currencies — was up 0.1% at 99.380, after hitting a three-month high on Thursday.
Dollar steady as Powell tempers rate cut hopes
The greenback continued to benefit from Powell’s post-meeting remarks following the Federal Reserve’s widely expected 25-basis-point rate cut on Wednesday. Speaking afterward, Powell emphasized that another similar move in December was “far from” a foregone conclusion.
As a result, traders have pared back expectations for another rate cut at the December 10 policy meeting. According to CME Group’s FedWatch tool, futures now imply a 74.7% probability of a quarter-point reduction, down from 91.1% a week earlier.
“The government shutdown has prevented jobs data from offering that catalyst, and Powell’s caution on a December cut has to be taken more at face value now,” analysts at ING said in a note.
ECB maintains steady stance
The euro strengthened slightly, with EUR/USD up 0.1% to 1.1570, after French inflation came in a touch weaker than expected — up 0.9% year-on-year in October, compared with 1.1% in September. The broader eurozone inflation report due later Friday is expected to show annual consumer price growth easing to 2.1% from 2.2%.
The European Central Bank kept its key deposit rate unchanged at 2% for a third straight meeting, repeating that monetary policy remained in a “good place” as economic risks recede.
“The coming weeks will see Governing Council members offering their nuances to the policy-inflation-growth assessments. But don’t expect much. The ECB is clearly in a ‘good place’ at 2% and the bar for more easing remains high,” ING said.
Pound dips amid UK political uncertainty
Sterling slipped 0.1% to 1.3143 amid renewed speculation about British Finance Minister Rachel Reeves’s future. “Markets are wary that a change in Chancellor could herald more relaxed fiscal rules and additional borrowing, at a time when gilt issuance remains elevated. A surprise resignation, which looks unlikely, would, in our view, cause elevated volatility in gilts and the pound,” ING added.
Yen weakens despite upbeat inflation data
In Asia, the yen gave up earlier gains, with USD/JPY rising 0.2% to 154.36. Tokyo’s consumer price index rose more than expected in October, with core inflation staying well above the Bank of Japan’s 2% target. Industrial output also beat expectations, though retail sales growth slowed.
The BOJ left interest rates unchanged on Thursday, as anticipated, but Governor Kazuo Ueda signaled the possibility of rate hikes ahead — contingent on wage growth trends.
China and Australia currencies under pressure
The Chinese yuan edged 0.1% lower to 7.1143 against the dollar, after the People’s Bank of China set a slightly weaker daily midpoint. Official PMI data showed China’s manufacturing sector contracted for the seventh straight month in October, with the composite PMI hovering near contraction territory as weak domestic demand and high U.S. tariffs continued to weigh on business activity.
Despite this, the yuan remains near its strongest level in a year, supported by the central bank’s consistent firm fixings.
Meanwhile, the Australian dollar slipped 0.2% to 0.6542, reversing gains as stronger-than-expected CPI data cooled expectations of further rate cuts from the Reserve Bank of Australia. The Aussie ended October down nearly 1%.
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