Investing.com – The U.S. dollar fell on Friday, giving back some of the previous session’s gains on sturdy retail sales, but stayed on track with a third straight weekly gain.

At 04:35 ET (08:35 GMT), the Dollar Index, which tracks the dollar against a basket of six other currencies, was trading 0.2% lower at 103.495.

Dollar wanted

The dollar rose to its highest level in more than 2 1/2 months on Thursday following stronger-than-expected data that added the latest signs of further resilience in the U.S. labor market.

That has led investors to largely sign expectations for the Federal Reserve to cut interest rates by 25 basis points next month, a smaller cut than the one with which the U.S. central bank began its rate-cutting cycle in September.

The dollar also gained favor due to increased expectations that Republican candidate Donald Trump will become president next month, given the likelihood of trade tariffs supporting the dollar.

“We still believe that some risk reduction until November 5 may lead to a defensive inflow of currencies into the dollar,” ING analysts said in a note.

Sterling strengthened by retail sales

In Europe, it gained 0.3% to 1.3049 after data released on Friday showed the British currency rose 0.3% in September, beating economists’ expectations for a monthly decline of 0.3%.

Combined with stronger gains in July and August, third-quarter sales rose 1.9%, the largest total augment since mid-2021.

“Despite this, growth data is currently of secondary importance to the BoE. More essential is the unexpected decline in services inflation this week, which suggests that further interest rate cuts are becoming increasingly likely,” ING added.

rose 0.1% to 1.0844, but the euro remains on course, posting a weekly loss of almost 1% following Thursday’s interest rate cut by .

In fact, the dollar’s three-week rise of 3% against the euro is the sharpest rise since mid-2022.

The ECB cut interest rates by 25 basis points to 3.25% following its September move – the first parallel rate cut since 2011.

While this cut was widely expected, the accelerating pace of interest rate cuts points to a deteriorating economic outlook amid signs that inflation is becoming increasingly under control.

Yuan supported by GDP data

fell 0.3% to 7.1037, and the pair fell after hitting a nearly two-month high earlier in the week.

China’s GDP grew 4.6% year-on-year, in line with expectations, although at a slower pace than the previous quarter. Quarter-on-quarter growth slightly exceeded expectations, while year-to-date GDP remained below the government’s annual target of 5%.

GDP data highlighted the need for greater economic support from Beijing. Over the past three weeks, the Chinese government has unveiled a range of stimulus measures, including both monetary and fiscal measures, but the lack of clear details on the timing, implementation and scale of the planned measures has led to circumscribed optimism among investors.

fell 0.1% to 150.00, with the Japanese yen slightly firmer after hitting a nearly three-month low earlier in the session.

data showed inflation rose slightly more than expected in September, although it was down from 10-month highs the previous month.