Dollar edges higher, but set for sharp weekly loss as inflationary pressures ease

investing.com:

Investing.com — The U.S. dollar edged higher in early European trade Friday, but was heading for a sharp weekly loss after cooling inflation spurred growing bets that the Federal Reserve has completed its series of rate hikes.

At 03:00 ET (08:00 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, rose 0.1% to 104.374, still on course for a weekly loss of around 1.3%.

The dollar has weakened this week growing expectations that inflation is in retreat and interest rate increases by the Federal Reserve are a thing of the past.

Tuesday’s drop in U.S. consumer prices started the ball rolling, but oil slipping to four-month lows and news from Walmart (NYSE:WMT) on Thursday that it will cut prices to help struggling consumers in the holiday quarter have added to the disinflationary pressures.

“Confidence that the Fed tightening cycle is over should be positive for the rest of the world currencies — especially those that are very sensitive to higher interest rates,” said analysts at ING, in a note.

“Yet with overnight rates in the US at 5.4%, the dollar is an expensive sell and the bar is high to invest elsewhere. That is why… the dollar bear trend is going to take some time to build and its more intense period may not be until 2Q24.”

There are a number of Fed speakers scheduled to speak later in the session, and traders will look for how hawkish they appear to be given the change in market tone. 

In Europe, GBP/USD fell 0.2% to 1.2377, weakening after data showed U.K. retail sales slumped 0.3% on the month in October, an annual fall of 2.7%, as British shoppers continued to struggle from the combination of higher interest rates and still elevated inflation.

U.K. CPI plunged to 4.6% on an