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MARKET UPDATE

The U.S. dollar stabilized on Friday, rebounding from losses in the previous session triggered by disappointing job data, while the British pound saw gains following robust growth figures.

Dollar Sees Small Gains Despite Weak Jobs Data

At 04:10 ET (08:10 GMT), the Dollar Index, tracking the dollar against a basket of six other currencies, held steady at 105.115, showing slight gains.

The dollar managed to stabilize on Friday, despite experiencing losses the day before due to a larger-than-expected increase in weekly jobless claims. This data, indicating a cooling U.S. labor market, raised expectations of potential interest rate cuts by the Federal Reserve, possibly starting as early as September.

However, concerns about persistent inflation levels remained a focal point for the Fed. Several officials emphasized this issue throughout the week, contributing to the dollar’s strength.

San Francisco Federal Reserve President Mary Daly expressed significant uncertainty about the direction of U.S. inflation in the coming months. She highlighted the need to monitor labor market conditions closely before considering any adjustments to interest rates.

The upcoming release of consumer price index data next week will be closely watched for further insights into the Fed’s monetary policy decisions.

Sterling Rises on Strong Growth Data

In contrast, the British pound experienced a modest uptick, with GBP/USD gaining 0.1% to 1.2534. This recovery followed Thursday’s decline, driven by encouraging growth data released earlier in the day.

Data revealed that the UK economy expanded at its fastest pace in nearly three years during the first quarter of 2024. Gross domestic product (GDP) grew by 0.6% in the three months to March, marking the strongest growth since the fourth quarter of 2021.

On a monthly basis, the economy expanded by 0.4% in March, surpassing initial forecasts of 0.1% growth.

While the Bank of England opted to maintain interest rates at a 16-year high during Thursday’s meeting, two members of the Monetary Policy Committee voted in favor of a rate cut. This indicates a potential shift towards monetary easing in the near future.

Other Currency Movements

EUR/USD remained largely unchanged at 1.0783, with minimal market-moving data to influence trading activity.

Meanwhile, USD/JPY edged higher by 0.2% to 155.70, significantly above its earlier May lows of 152. Market participants now view the 160 level as a crucial threshold for potential Japanese government intervention.

USD/CNY saw a slight uptick of 0.1% to 7.2249, with the yuan weakening following reports suggesting potential fresh sanctions by U.S. President Joe Biden on certain Chinese industries. Concerns about escalating trade tensions between the world’s two largest economies weighed on market sentiment.

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