By Scott Kanowsky
The euro inched higher against the dollar on Friday, with investors weighing key European economic data as well as the implications of contracting U.S. growth and Federal Reserve interest rate hikes.
At 02:52 EST (0652 GMT), the EUR/USD was trading up by 0.40% at $1.0237.
The spotlight today will fall on the Eurozone gross domestic product figures for the second quarter. Economists are calling for GDP to rise 0.2% during the period, a slowdown from the 0.6% quarterly growth in the first three months of the year.
French GDP also rose 0.5% on the quarter, ahead of the 0.2% growth expected. But downside risks likely remain, evidenced by European Central Bank Governing Council member Ignazio Visco’s warning on Thursday that there was still a possibility the region could tip into a recession.
Data on Thursday showed the U.S. economy contracted again in the second quarter, as the country’s gross domestic product fell at a 0.9% annualized rate last quarter, after a 1.6% contraction in the quarter before that.
Two consecutive quarters of negative growth is widely seen as the technical definition of a recession, but the U.S. does not adhere to that definition.
On Wednesday, the Fed also suggested that a slowdown in economic activity may lead it to pump the brakes on raising borrowing costs. The comment came after the central bank increased interest rates by 75 basis points for the second straight month in a bid to bring down soaring inflation.
The US Dollar Index moved lower on Friday, down 0.63% to 105.68 after touching its weakest level since July 5. The measure of the greenback against a basket of several other major currencies is on pace for a second straight weekly loss.
Meanwhile, the pound also strengthened against the dollar by 0.59% to $1.2238. Traders are mulling over the expectations that the Bank of England will raise interest rates by 50 basis points when it meets next week.
In Asia, the yield-sensitive yen gained against the dollar, touching a six-week high of JPY 132.76. The currency is on track for its best month versus the dollar in about three years, as the narrowing spread between benchmark yields in Japan and the U.S. spurred a flight away from short yen positions.
The Australian dollar also strengthened to a six-week high against the dollar. The Reserve Bank of Australia will make a rate decision of its own next week.
Elsewhere, cryptocurrency Bitcoin raced towards its best monthly gain since last October, gaining by 3.30% to $23,848.70.