The US dollar weakened on Friday as investors assessed the Federal Reserve is likely to raise interest rates at its July meeting and in the meantime investors took profits after strengthening to a two -decade high.
The US dollar soared on expectations that the Fed would raise rates faster as inflation soared to a four -decade high.
The dollar strengthened temporarily on Friday as U.S. retail sales strengthened more than expected in June. According to Joseph Trevisani, senior currency analysts argue that better -than -expected retail sales are driven by inflation.
The US dollar index, which measures the US dollar against six major currencies, traded down 0.47% to 107.9. The Euro was 0.39% stronger at $ 1.0062. It traded as low as $ 0.9952 on Thursday, the weakest since December 2002.
Investors raised bets that the Fed would raise rates faster after data on Wednesday showed annual U.S. consumer prices jumped 9.1% in June, the biggest increase in more than four decades.
The probability of a 100 basis point increase is very likely however both Fed officials only prefer a 75 basis point increase. The euro is likely to face two major catalysts next week with the European Central Bank expected to raise rates by 25 basis points for the first time since 2011.
Investors will also focus on whether or not the critical Nord Stream 1 gas pipeline to Germany from Russia will be reopened. It is planned to reopen on July 21, but European governments fear Moscow could extend it to restrict European gas supplies, disrupting plans to build reserves for the winter.
