After the release of data on U.K. growth for the first quarter, sterling edged higher while the U.S. dollar edged lower in early European trade on Friday, reversing some overnight gains.
The Dollar Index, which measures the dollar against a basket of six other currencies, was trading 0.1% lower at 101.785 at 03:15 ET (07:15 GMT), ending a two-week losing streak.
The number of Americans filing new claims for unemployment benefits hit an 112-year high last week, according to data released on Thursday. Additionally, producer prices saw a modest rebound in April.
This raises the possibility that the Federal Reserve of the United States will stop its aggressive cycle of monetary tightening in June, which has weighed on the dollar for much of the year.
Be that as it may, the dollar got a lift on Thursday, with the file moving to its most noteworthy since May 2, on vulnerability encompassing the raising of the U.S. obligation roof.
A gathering between U.S. President Joe Biden and top officials about the subject that was booked for Friday has been deferred, and the U.S. national government could hit rock bottom financially to cover its bills when June 1 except if the obligation roof is raised.
Analysts at ING wrote in a note that “the dollar bounce seen yesterday was the result of some position-squaring and below-consensus data,” and that “the still unstable risk environment caused by recessionary fears and the US debt ceiling stalemate keeps creating a breeding ground for more defensive positions in FX” was the cause of the currency’s recent rally.
In another area, data revealed that U.K. gross domestic product grew by 0.1% in the first three months of 2023, despite an unexpectedly sharp drop of 0.3 percent in March. As a result, GBP/USD surged 0.2% to 1.2535.
The Bank of Britain climbed loan fees by 25 premise focuses on Thursday, its twelfth straight financing cost increment as it endeavors to battle expansion still in twofold digits.
ING added, “Our base case is that we have reached the peak of the BoE tightening cycle as inflation will start to rapidly decelerate this year.” However, “while we do not exclude one final hike in June,”
EUR/USD increased by 0.2 percent to 1.0930, USD/JPY increased by 0.2 percent to 134.83, and AUD/USD decreased by 0.1 percent to 0.6694 in response to demand for safe havens.
USD/CNY edged lower to 6.9463, however stayed near the mentally significant 7 level against the dollar on questions about the strength and speed of the recuperation of the Chinese economy.
