Investing.com – The U.S. dollar rose modestly on Friday, heading for a positive week, while the pound weakened after faint retail sales data was released.

The dollar index, which tracks the U.S. currency against a basket of six other currencies, was up 0.2% at 104.065 at 04:10 ET (09:10 GMT), reversing losses from a near four-month low and heading for its first weekly gain in three months.

The dollar has a unthreatening offer

The dollar rebounded from recent lows as U.S. jobs and manufacturing data increased uncertainty about when the Federal Reserve will start cutting interest rates.

The US currency is also in demand as a safe-haven investment amid weakening US-China relations and growing uncertainty over the US presidential race, amid calls for President Joe Biden to withdraw from his re-election bid.

“If President Biden were to step down, there is a scenario where the dollar could fall somewhat as Democrats would have a better chance of holding on to the Senate and we would be dealing with a ‘Trump constraints’ scenario,” ING analysts said in a note.

The pound is retreating from recent highs

fell 0.2% to 1.2914, down after hitting a yearly high earlier in the week.

The UK stock market fell 1.2% in June against an estimated 0.4% decline, suggesting British consumers are feeling the effects of high interest rates.

Combined with the latest data showing a slowdown in UK wage growth and inflation at 2%, the Bank of England’s assumption that an interest rate cut will come in August rose to 43% from around 39% on Thursday.

fell 0.2% to 1.0878, down further from Wednesday’s four-month peak, after leaving rates unchanged at Thursday’s meeting.

“The market’s expectations for interest rates seem quite reasonable to me at the moment,” Francois Villeroy de Galhau, a member of the ECB’s executive board, told French radio station BFM Business on Friday when asked if he agreed with expectations of a potential rate cut in September and another in December.

Markets are pricing in the possibility of almost two ECB interest rate cuts by the end of the year.

Yen loses value after CPI data

In Asia, the gauge fell 0.1% to 157.29 after Japanese inflation came in lower than expected in June, adding to uncertainty over whether the Bank of Japan will have enough leeway to raise interest rates at its meeting later this month.

Earlier this week, the rate fell to around 155, prompting speculation that the Japanese government was intervening in currency markets.

rose 0.1% to 7.2674, with the pair approaching levels last seen in November 2023.

The yuan fell on recent reports that the U.S. is considering tougher trade sanctions on China’s technology sector and chipmaking, a move that could prompt retaliatory action from Beijing.