The dollar rallied on Friday, extending overnight gains in the NorAm session with the help of forecast-beating University of Michigan sentiment and expectations as well as weekend position pruning following losses in previous sessions.
In late trade, the dollar index was holding just below session highs at 105.64 as dollar sales that occurred in the wake of this week's unexpectedly soft CPI and PPI were unwound.
Traders were shifting focus from expectations that reduced inflation would lead to an earlier and lower peak the fed funds rate to comments from Fed officials indicating continued vigilance over taming price growth until it demonstrates a sustainable move toward the 2% target.
EUR/USD fell 0.52% to 1.0265 as traders repriced the euro for a less-dovish Fed and after its gains earlier in the week were capped by 1.0363, the 50% Fib of 1.0774-0.9952 and the 55-DMA at 1.0365.
Growth concerns for the euro zone owing to rate hikes and rising energy costs remain hindrances for on EUR/USD gains.
USD/JPY rallied 0.4% to 133.48 amid higher U.S. rate expectations, unraveling its midweek dip towards 132 that occurred during the initial reaction to U.S. CPI and PPI.
It was straddling the 10-day moving average at 133.62, and a close above 133.62 would put the 55-DMA at 134.79 and the Aug.
8 high at 135.59 in focus.
GBP/USD fell as sterling bulls cut positions despite a relative GDP beat versus Reuters forecasts, wary that soaring UK inflation and BoE rate hikes will hinder growth.
A close below the daily cloud base at 1.2161 added to sterling’s bearish structure, putting support at the 21-DMA by 1.2091 in focus.
Risk was broadly higher, with the S&P 500 index up 1.1%, while Treasury yields moved higher and BTC and ETH eked out tiny gains.
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