The dollar dipped on Friday after U.S. economic data confirmed the likelihood of a July interest rate cut, although foreign exchange markets seemed on hold as investors awaited the meeting between the United States and China at the G20 summit in Japan.
The core U.S. personal consumption expenditure price index rose 0.2% in May, as expected, reinforcing investor expectations that the Federal Reserve will cut rates by 25 basis points to 2.25% at the next meeting.
Moreover, it remains unclear whether U.S. President Donald Trump and Chinese President Xi Jinping will agree on a truce or escalate their trade conflict further, leaving investors unsure about how to trade the dollar.
Negotiations between the world’s two largest economies have been fraught, however, and traders and analysts caution that a resolution at the G20 summit is far from certain.
Sterling recovered on Friday from the five-month lows it reached earlier in the day against the dollar and euro, although worries about a no-deal Brexit capped the currency’s gains.
Investors are reluctant to take big positions in the pound amid the Conservative party leadership contest, which should end with a new prime minister in place by the end of July.
Boris Johnson, the front runner, has said Britain will leave the European Union on Oct. 31 deal or no deal. But he has also said there is only one chance in a million of leaving without an agreement in place.
Sterling was unmoved by data showing showed the British economy grew 0.5% in the first quarter, in line with expectations.
The pound is widely expected to remain under pressure until there is clarity around Brexit.
All day: OPEC Meetings
15.00 – USD: ISM Manufacturing PMI; Forecast the same as previous at 50.1