The dollar is approaching lows; sterling gains after strong retail sales By Investing.com

Investing.com – The U.S. dollar rose on Friday but remained under pressure after the Federal Reserve’s sharp interest rate cut, while the pound gained strongly after healthy UK retail sales data.

At 04:00 ET (09:00 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, traded 0.2 percent higher at 100.480 but remained just above the trough from 12 months.

The dollar is fighting for buyers

The US dollar is fighting for friends after the Federal Reserve kicked off a rate-cutting cycle with a hefty 50 basis point cut to a range of 4.75% to 5%.

Markets are implying a 40% chance the Fed will cut another 50 basis points in November and price it at 73bps by the end of the year. Rates are seen at 2.85% until the end of 2025, which is now considered to be the Fed’s neutral estimate.

“But the big question for the market right now is whether the dollar is ready to break out of its two-year range,” analysts at ING said in a note. “There doesn’t seem to be anything on the agenda today that warrants a breakout, but suffice it to say we’re in camp looking for further strong selling should the DXY support levels at 99.50/100 break.”

The pound is rising this week

In Europe, it rose 0.2% to 1.3312, sterling rose more than 1% this week to its highest level since March 2022.

Data released earlier on Friday showed Britain grew by a stronger-than-expected 1% in August, and July growth was revised up to 0.7% from a previous estimate of a 0.5% month-on-month increase to the moon.

Interest rates held their key interest rate at 5% on Thursday after starting easing with a 25bp cut in August.

it traded 0.1% higher at 1.1163, up nearly 1% for the week and within striking distance of its August peak of 1.1201.

It cut rates for the second time this year last week, but there is a degree of uncertainty about when the next move will be.

fell less than expected in August, falling 0.8% year-on-year, below expectations for a 1.0% drop.

Yen slips after BOJ meeting

rose 0.7 percent to 143.62 after interest rates held steady and said it expected inflation and economic growth to pick up steadily.

The BOJ’s decision and forecasts came just hours after consumer price index data showed inflation rose to its highest level in 10 months in August as rising wages led to an increase in private consumption.

While the yen had weekly losses, it still remained close to the strongest 2024 levels hit earlier in the week.

traded 0.2 percent lower at 7.0538 after the People’s Bank of China kept its benchmark unchanged, defying some expectations that it would cut interest rates further to stimulate the economy.

The PBOC’s decision came even as a number of recent economic indicators showed sustained weakness in China.