Investing.com – The U.S. dollar rose modestly on Friday but remained under pressure after the Federal Reserve cut interest rates significantly, while sterling rose strongly on sturdy U.K. retail sales data.

At 04:00 ET (09:00 GMT), the dollar index, which tracks the US currency against a basket of six other currencies, was up 0.2% at 100.480 but remained slightly above a 12-month low.

The dollar is fighting for buyers

The US dollar is struggling as the Federal Reserve begins a 50 basis point interest rate cut cycle to a range of 4.75% to 5%.

Markets indicate a 40% chance that the Fed will cut rates another 50 basis points in November and that it will include 73 basis points by the end of the year. By the end of 2025, rates are expected to be 2.85%, which is currently considered the Fed’s neutral estimate.

“But the big question for the market now is whether the dollar is ready to break out of its two-year range,” ING analysts said in a note. “There doesn’t seem to be anything on the agenda today that would warrant a breakout, but suffice it to say we are in the camp looking for strong follow-on selling if DXY support levels at 99.50/100 give way.”

The pound sterling is gaining value this week

In Europe, it rose 0.2% to 1.3312, with the pound up more than 1% this week to its highest level since March 2022.

Data released on Friday showed Britain’s economy grew 1% more than expected in August, while growth in July was revised up to 0.7% from an earlier estimate of 0.5% month-on-month growth.

The key interest rate was kept at 5% on Thursday, after starting to ease monetary policy with a 25 basis point cut in August.

rose 0.1% to 1.1163, up almost 1% on the week and close to the August peak of 1.1201.

Last week, interest rates were cut for the second time this year, but there is some uncertainty about when the next move will come.

fell less than expected in August, falling 0.8% year-on-year and below the expected 1.0% decline.

Yen drops after BOJ meeting

rose 0.7% to 143.62 after keeping interest rates unchanged and saying it expected inflation and economic growth to rise steadily.

The BOJ’s decision and forecast came just hours after consumer price index data showed inflation hit a 10-month high in August as rising wages boosted private consumption.

While the yen fell for a week, it still held close to 2024 highs reached earlier in the week.

fell 0.2% to 7.0538 after the People’s Bank of China kept its benchmark unchanged, defying some expectations that it would cut interest rates to stimulate the economy.

The PBOC’s decision comes as a number of recent economic indicators have shown continued weakness in China.