Investing.com – The U.S. dollar steadied early in the European session on Friday ahead of key inflation data, the euro rose slightly and the Japanese yen weakened slightly but was still heading for its strongest week in three months.

At 04:00 ET (09:00 GMT), the dollar index, which tracks the US currency against a basket of six other currencies, was unchanged at 104.127.

Dollar looks towards PCE release

The dollar found some support from data that showed economic growth was faster than expected and inflation slowed in the second quarter.

The reading raised hopes that the US economy was heading for a tender landing, meaning economic growth would remain stable and inflation would fall.

However, the dollar’s appreciation was narrow because the US economy is not the only factor influencing the situation on currency markets.

“The tech sell-off, early positioning ahead of the US election and carry trade unwinds generated moves that were large enough to outpace the US data,” ING analysts said in a note.

Still, the focus on Friday will now be on data due later in the session. Inflation is expected to fall further in June, keeping expectations of a rate cut in September alive.

The Euro is drifting upwards

In Europe, the indicator rose slightly to 1.0845 after data showed euro zone consumers stopped lowering their inflation expectations in June after four consecutive monthly declines.

The ECB’s consumer expectations survey shows that median consumer expectations for inflation will average 2.8% over the next 12 months, remaining stable since May after falling steadily from 3.3% in January.

The European Central Bank cut interest rates in June and is widely expected to do so again in September, but policymakers would undoubtedly prefer to see those expectations continue to fall as monetary policy eases.

rose 0.2% to 1.2870, but was well below the yearly high of 1.3044 reached last week.

The meeting will take place next week. Although markets are expecting around 50 basis points of interest rate cuts this year, there is still a lot of uncertainty about whether policymakers will agree to a rate cut then or postpone it until September.

Yen looks ahead to Bank of Japan meeting next week

In Asia, the yen rose 0.2% to 154.25, with the yen’s recent gains tempered somewhat by frail inflation, which remained relatively low in July.

The frail inflation reading came just days before the meeting, and analysts were divided on whether the central bank would have enough leeway to raise rates by 10 basis points.

However, the yen was on track to rise 2.5% this week, which would be its biggest weekly gain since behind schedule April and early May, after suspected interventions boosted the currency.

rose 0.3% to 7.2520, with the yuan weakening on suspicions of Chinese government intervention that sent the currency soaring against the dollar on Thursday.