The U.S. dollar experienced an upward movement on Friday, following a decline attributed to a rise in U.S. jobless claims and a slight increase in inflation. This shift comes in anticipation of a Federal Reserve meeting next week, where a reduction in interest rates is expected after a pause lasting approximately nine months.

The greenback appreciated by 0.2% to 147.53 yen, marking its third consecutive week of gains. The dollar strengthened earlier on Friday following a joint statement from the U.S. and Japan, which emphasized that exchange rates ought to be “market determined” and highlighted that excessive volatility and disorderly fluctuations in exchange rates are undesirable. The decline in U.S. consumer sentiment for the second consecutive month in September had a minor impact on the value of the greenback. Reports indicated that its consumer sentiment index decreased to 55.4 this month, marking the lowest level since May, down from a final reading of 58.2 in August. Economists are anticipated a figure of 58.0, reflecting minimal variation from the previous month.

“If the Fed delivers the rate cut that is widely expected next week, and they signal that more rate cuts are coming, businesses may find optimism that they have an opportunity to recapture margin lost to tariffs, and consequently they can increase their capacity to increase headcount,” Tom Simons. On Thursday, data revealed the largest weekly rise in four years in the number of Americans submitting new applications for jobless benefits. The U.S. consumer inflation data for August was overshadowed, revealing that prices increased at the fastest rate in seven months. However, these increases remained modest and largely aligned with expectations. Although the mixed data may introduce complexities to the Fed’s policy discussions next week, investors are primarily concentrating on the potential for rate cuts. The pricing of Fed fund futures suggests that market participants are confident the Fed will reduce its key interest rate by 25 basis points on September 17.

Traders have adjusted their expectations regarding a more significant 50 basis points rate cut next month, with current pricing suggesting a less aggressive easing trajectory for the remainder of the year than previously expected.
The benchmark 10-year Treasury note yield increased by 4.9 basis points, reaching 4.06%. On Thursday, the yield decreased to below 4% for the first time since April. The euro remained stable against the dollar at $1.1736, following a rise the previous day, as traders reduced their expectations for another rate cut by the European Central Bank this cycle, now anticipating a move with less than a 50% probability. The ECB maintained its key interest rate at 2% for the second consecutive meeting on Thursday.  President Christine Lagarde noted that the euro zone is in a “good place” and indicated that the risks to the economy have become more balanced than previously observed.
Fitch Ratings is anticipated to announce its assessment of French public finances after the markets close on Friday, subsequent to the confidence motion on September 8.

“Going explicitly against the direction of its model and ‘manually’ downgrading the rating would require the agency to conclude that the balance of power between stakeholders of public funds has shifted further away from financial creditors since the last rating decision in spring,” analysts noted in a research report. Among other currencies, sterling remained relatively stable at $1.3564, following data indicating that the British economy stagnated in July. Meanwhile, the Australian dollar experienced a slight decline at US$0.6651, remaining close to a 10-month high.