The dollar stayed near a two-week high versus on Friday as investors pared expectations for aggressive Federal Reserve interest rate cuts ahead of key U.S. economic data later in the day.
The euro held gains after the European Central Bank (ECB) kept policy unchanged, disappointing some market participants who had bet on an easing, but sources expect a rate cut at the ECB’s next meeting.
The Fed is widely expected to cut rates, but there are growing views such a move may be a one-off event, not the start of a major easing cycle.
Data due later on Friday is expected to show U.S. economic growth slowed to 1.8% in the second quarter from 3.1% in the previous quarter, but investors will focus on consumer spending to gauge underlying strength of the economy.
The Fed is widely expected to lower its target range of 2.25%-2.50% by 25 basis points at a meeting ending July 31, but expectations for a 50-basis point have waned due to positive economic data.
After the ECB meeting, President Mario Draghi indicated the bank was prepared to cut rates at its next one in September and consider other options for easing. Government bond purchases and a revamped policy message are also likely at the ECB’s next meeting, four sources close to the discussion told Reuters.
Sterling was on course for a 0.5% weekly loss. Cable has stabilized since Boris Johnson became Britain’s new prime minister, but there is still uncertainty about Britain’s negotiations to leave the European Union.