Investing.com – The U.S. dollar fell slightly on Friday, giving up some of the previous session’s significant gains after the release of solid retail sales data played down fears of an imminent U.S. recession.

At 05:15 ET (09:15 GMT), the dollar index, which tracks the U.S. currency against a basket of six other currencies, was down 0.1% at 102.725, after rising 0.4% overnight in its biggest one-day gain in four weeks.

Jackson Hole could affect dollar sentiment

Strong inflation data released this week indicates that the US Federal Reserve will begin cutting interest rates at its next meeting in September.

However, the stronger-than-expected July result eased concerns that the central bank is lagging and will have to cut interest rates aggressively to avert a recession.

This helped the dollar recoup losses from earlier in the week, although it is still on track to end the week in the red.

“The data has prompted investors to re-price a 25bp Federal Reserve rate cut on September 18. However, there will be plenty of inputs into the Fed equation and the calendar of events will pick up speed next week,” analysts at ING said in a note.

The headline event next week will be the Federal Reserve’s annual Jackson Hole Symposium, where Chairman Jerome Powell will have a chance to steer markets ahead of the Federal Reserve’s next policy-setting meeting.

The overnight reference rate has remained at 5.25%-5.50% since July last year, after the reference rate was raised by 525 basis points from 2022.

Retail sales helped sterling

In Europe, it rose 0.3% to 1.2891 after data showed the British currency rose in July, recovering losses from a disappointing June.

Retail sales volumes rose by 0.5% in July after falling by 0.9% in June, and were 1.4% higher than a year earlier, the Office for National Statistics said.

In early August, interest rates were cut for the first time in more than four years. However, doubts remain as to whether the central bank will agree to further rate cuts this year.

rose 0.1% to 1.0981, rebounding from a 0.4% decline in the previous session, but still near a one-week high of 1.1047, its highest level this year.

The yen is rising slightly

In Asia, it fell 0.4% to 148.75, with the pair still holding near the 150 level after falling to 141 yen last week on a slump in global risk-on markets.

Still, the outlook for the yen seemed mighty, especially as data this week showed the Japanese economy gaining momentum on higher wages. The economy’s strength is expected to give the Bank of Japan more room to keep raising interest rates.

The currency fell 0.1% to 7.1673, with the yuan posting a miniature gain, even though a series of mixed economic data from China did little to improve sentiment towards the yuan, nor did Beijing’s assurances of further stimulus measures.

Attention now turns to the People’s Bank of China’s decision on its benchmark next week after the PBOC unexpectedly cut interest rates in July.