By Kevin Buckland and Alun John
TOKYO/LONDON (Reuters) -The dollar paused near a two-month high against a basket of peers on Friday, as traders digested the latest inflation and jobs data, while a rise in British economic growth could not raise the pound from one-month lows.
Moves were fairly muted across major currencies, but the euro was up 0.09% at $1.10947, the pound up 0.12% at $1.3076 and the yen a fraction firmer at 148.67 per dollar
That left the dollar index at 102.8, down around 0.1%, taking a breather after its steady climb that took it above 103 on Thursday, its highest since mid August, on the back of traders reducing bets on further jumbo rate cuts by the Federal Reserve at its remaining meetings this year.
U.S. core consumer inflation came in at 0.3% in September, slightly hotter than expected, which pointed to stalling progress in the Federal Reserve’s fight against inflation.
However, high weekly jobless claims figures kept bets that the Fed remains on track to cut interest rates by 25 bps in November.
“The data yesterday from the U.S. has taken some of the upward momentum out of the dollar,” Lee Hardman, senior currency analysts at MUFG, said “though in terms of the impact on Fed policy making, we think it’s pretty limited. There’s a lot of noise in there.”
The weekly jobless claims data was skewed by Hurricane Helene. Next week’s data will be impacted by Hurricane Milton.
There was plenty for markets to digest elsewhere.
Britain’s economy grew in August after two consecutive months of stagnation, providing some relief to finance minister Rachel Reeves ahead of the new Labour government’s first budget later this month.
However the pound was broadly steady on the dollar and little changed on the euro at 83.76 pence to the common currency.
More important for the pound is inflation and labour market data next week.
Traders are also watching French politics, after the government on Thursday delivered its 2025 budget with plans for 60 billion euros ($65.5 billion) worth of spending cuts and tax hikes on the wealthy and big companies to tackle a soaring fiscal deficit.
The budget is unlikely to pass until December, as French Prime Minister Michel Barnier and his allies in President Emmanuel Macron’s camp lack a majority by a sizeable margin and will have little choice but to accept numerous concessions.
The immediate risk to the euro from French politics, Hardman said, is that ratings agency Fitch is scheduled to update its view on France’s debt late on Friday, which could trigger a short term reaction.
“But I don’t think it would have a sustained negative impact. For that to happen, French bonds would have to suffer a heavier sell-off and trigger a sustained lack of confidence,” he added.
Markets are also awaiting a news conference from China’s finance ministry on fiscal policy on Saturday. Waxing and waning in stimulus expectations have buffeted China-exposed antipodean currencies this week.
The Australian dollar was last flat on the day at $0.6739, and set for a weekly fall of 0.8%.
The New Zealand dollar was at $0.6096, set for a weekly fall of over 1%, also due to the central bank on Wednesday slashing rates by a half point and hinting at further cuts to come.
In emerging markets, one other focus was India where the rupee weakened past 84 against the dollar for the first time, leading, traders thought, to the Indian central bank selling dollars to prop it up.
(Reporting by Kevin Buckland; Editing by Edwina Gibbs, Kim Coghill and Andrew Heavens)
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