Investing.com – The US dollar was steady in early European trading on Friday, ahead of the release of key inflation data. The euro rose slightly while the Japanese yen fell slightly, but remained on track for the strongest week in three months.
At 04:00 ET (09:00 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading largely unchanged at 104.127.
Dollar looks forward to PCE release
The dollar found some support from data showing inflation growing faster than expected and slowing in the second quarter.
The data boosted hopes that the US economy was heading for a soft landing, where growth will remain stable while inflation declines.
However, the dollar’s gains were limited as the US macroeconomy is not the only driving force in currency markets today.
“The fallout from the tech sell-off, early US election positioning and the unwinding of carry trades have generated moves large enough to overshadow US data,” ING analysts said in a note.
That said, the focus on Friday is now squarely on data, due later in the session, which is expected to show that inflation eased further in June, leaving expectations for a cut in September intact.
The euro floats higher
In Europe, inflation rose marginally to 1.0845 after data showed eurozone consumers stopped lowering their inflation expectations in June after four straight monthly declines.
The ECB’s Consumer Expectations Survey shows that average consumer expected inflation over the next 12 months will average 2.8%, stable compared to May, after a steady decline from 3.3% in January.
The ECB cut rates in June and is widely expected to do so again in September, but policymakers would undoubtedly prefer to see these expectations continue to fall as monetary policy is eased.
traded 0.2% higher at 1.2870, but well below last week’s one-year high of 1.3044.
These meet next week, and while markets expect a cut of around 50 basis points this year, there remains a lot of uncertainty over whether policymakers will then agree to a rate cut or postponement until September.
Yen is looking forward to next week’s BOJ meeting
In Asia, yields rose 0.2% to 154.25, with the yen’s recent advance somewhat halted by soft inflation, showing inflation remaining largely subdued in July.
The soft inflation data came just days before a meeting that left analysts divided over whether the central bank will have enough room to raise rates by 10 basis points.
However, the yen was on track to rise 2.5% this week, its biggest weekly gain since late April-early May, after suspected interventions boosted the currency.
rose 0.3% to 7.2520, with the yuan retreating after suspected intervention by the Chinese government saw the currency rise sharply against the dollar on Thursday.
