The US dollar fell on Friday as investors remained cautious about interest rate expectations ahead of the release of import price data, after recent figures suggested inflation could accelerate in the coming months.

The Japanese yen outperformed the euro and the pound sterling after unexpectedly strong growth data from Japan showed that export volumes remained steady despite the new US tariffs.

Attention is turning to a meeting later on Friday in Alaska between US President Donald Trump and his Russian counterpart Vladimir Putin, amid doubts about the possibility of reaching a ceasefire agreement in Ukraine.

US import price data will receive more attention than usual after Thursday’s data showed a sharp and unexpected rise in producer prices last month, which had pushed the dollar higher.

If import prices continue to rise, it may indicate that US companies are bearing the full burden of tariffs, leaving them with two options: pass the costs on to consumers—potentially fueling inflation—or reduce their profit margins.

Financial markets are pricing in a 95% chance of a 25-basis-point US interest rate cut in September. Before Thursday’s data, markets had already priced in such a cut and a 5% probability of a larger 50-basis-point cut.

Markets are also awaiting next week’s Jackson Hole symposium for clearer signals on the Fed’s next move, as signs of weakness in the US labor market, coupled with inflationary pressures from trade tariffs, could pose a dilemma for the interest rate path.

The yen rose by 0.4% against the dollar to 147.20 yen, supported by data showing the Japanese economy grew faster than expected in the second quarter.

Remarks earlier this week by US Treasury Secretary Scott Bessent—who said the Bank of Japan might be “behind” in addressing inflation risks—also helped the yen.

Jane Foley, head of FX strategy at Rabobank, said: “Although Bank of Japan Governor Kazuo Ueda may dismiss Bessent’s remarks, Japanese authorities will not want the yen’s exchange rate to become a bigger concern for the Trump administration than it already is.”

The euro rose by 0.25% against the dollar to $1.1675, with most analysts expecting the single European currency to benefit from any ceasefire agreement in Ukraine.

Francesco Pesole, FX strategist at ING, said: “The Trump-Putin meeting and any greater clarity on the future course of the conflict in Ukraine have longer-term implications for the euro than for the dollar,” adding: “There’s a chance today could be the first step toward de-escalation, and markets may move cautiously now.”

The pound sterling rose by 0.20% against the dollar to $1.3553, while the Australian dollar gained 0.2% to $0.6508.

The Chinese yuan retreated from a two-week high as sentiment weakened due to weaker-than-expected economic data.

In cryptocurrency markets, both Bitcoin and Ethereum rose after falling by about 4% each on Thursday. Bitcoin had touched a record high earlier on Thursday amid shifting expectations for US interest rate cuts.

Gold prices rose in the European market on Friday, moving into positive territory, supported by the current decline in US dollar levels. However, they remain on track to post a weekly loss, as stronger-than-expected US producer price data reduced the likelihood of a large 50-basis-point interest rate cut by the Federal Reserve in September.

To reprice the existing expectations around a US interest rate cut, investors are awaiting the release later today of key US economic data on monthly retail sales and confidence levels in the world’s largest economy.

Price Overview

• Gold prices today: Gold rose by 0.4% to $3,348.77, from the opening level at $3,335.33, with the lowest price recorded at $3,332.33.

• At Thursday’s settlement, gold prices fell by 0.65%, marking their first loss in three days, due to the dollar’s rebound following strong US producer price data.

Weekly Performance

Over the course of this week, which officially ends at today’s settlement, gold prices are down about 1.5%, on track for their first weekly loss in three weeks amid slowing demand for the metal as a safe haven.

US Dollar

The US dollar index fell by 0.3% on Friday, resuming losses that paused temporarily yesterday and moving once again toward a two-week low, reflecting the decline in the US currency against a basket of major and minor peers.

US Interest Rates

• US producer prices in July recorded the fastest rise in three years, driven by a sharp increase in goods and services costs due to tariffs.

• Following the data, and according to the CME Group’s FedWatch tool, the pricing for a 25-basis-point cut in September fell from 99% to 92%, while the probability of keeping rates unchanged rose from 1% to 8%.

• The pricing for a 25-basis-point cut in October slipped from 99% to 93%, while the probability of no change rose from 1% to 7%.

• All expectations for a 50-basis-point cut in either September or October have completely faded.

• St. Louis Fed President Alberto Musalem stated that a half-point rate cut in September is unjustified, a day after Treasury Secretary Scott Bessent suggested it could be possible.

Important Data

To reassess the above US interest rate expectations, investors are watching for the release later today of US economic data on July retail sales, as well as the University of Michigan’s August confidence and inflation expectations indexes.

Gold Outlook

• Tim Waterer, chief market analyst at KCM Trade, said gold is still dealing with the fallout from the higher producer price index, which raised questions about the Fed’s willingness to cut rates this year.

• Waterer added that if the wholesale price rise becomes a trend that translates into higher consumer prices, expectations for US interest rate cuts may weaken, potentially capping gold’s upside from a yield perspective.

SPDR Fund

Gold holdings at SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell yesterday by 2.86 metric tons to 961.36 metric tons, down from 964.22 metric tons, which was the highest level since September 12, 2022.

The British pound rose on Friday against a basket of global currencies, resuming the gains that had paused yesterday against the U.S. dollar, on its way toward touching its highest level in five weeks again, and on the verge of achieving a second consecutive weekly gain.

The sterling’s strong performance this week comes thanks to the release of a series of strong economic data in the United Kingdom, especially those related to gross domestic product, which showed that the British economy grew better than expected during the second quarter of this year.

These data indicate continued pressure on monetary policymakers at the Bank of England, which led to a decline in expectations for a 25-basis-point cut in British interest rates in September.

Price outlook

• Pound exchange rate today: The pound rose against the dollar by 0.15% to $1.3551, from the opening price of $1.3533, and recorded the lowest level at $1.3526.

• On Thursday, the pound lost 0.35% against the dollar, in its first loss in the past three days, after having earlier in the session recorded a five-week high at $1.3595.

• Apart from correction and profit-taking, the pound declined in parallel with most major and minor currencies, following the release of strong U.S. producer price data.

Weekly trading

Over the course of this week, which officially ends with today’s settlement, the pound is up so far by 0.75% against the U.S. dollar, on the verge of achieving a second consecutive weekly gain.

UK economy

Data released in London on Thursday showed that the British economy grew by 0.3% in the second quarter, surpassing market expectations of 0.1% growth, after recording 0.7% growth in the first quarter.

On a monthly basis, the British economy grew by 0.4% in June, better than market expectations of 0.2% growth, after stagnating at -0.1% in May.

The British economy is expected to make further progress in the coming quarters, supported by a potential improvement in economic indicators and stable financial conditions, especially after the UK government reached a major trade agreement with the United States, which is expected to boost exports and stimulate foreign investment.

UK interest rates

• Following the above data, pricing of the likelihood of the Bank of England cutting British interest rates by 25 basis points at its September meeting fell from 30% to below 20%.

• After a hawkish Bank of England meeting last week, traders reduced their bets on BoE easing and anticipated additional cuts of 17 basis points this year.

The Japanese yen rose in Asian trading on Friday against a basket of major and minor currencies, resuming gains that had briefly paused yesterday against the US dollar, moving again toward a three-week high. The rise came after stronger-than-expected data on Japan’s economic growth — the world’s fourth-largest economy.

The data boosted expectations that the Bank of Japan could raise interest rates by 25 basis points in September, pending more upcoming releases on inflation, wages, and unemployment.

Price Action

USD/JPY fell about 0.4% to ¥147.20 from today’s opening at ¥147.75, after hitting a session high of ¥147.87.

On Thursday, the yen ended down 0.25% against the dollar, its first decline in three days, after earlier touching a three-week high at ¥146.21.

Aside from profit-taking, yen levels weakened alongside most other major and minor currencies after strong US Producer Price Index data.

Japanese Economy

Preliminary GDP figures showed Japan’s economy grew 0.3% in Q2 2025, above market forecasts of 0.1% growth. The economy posted flat growth (0.0%) in Q1.

The stronger-than-expected GDP reading came despite Japan’s struggle with an unstable trade environment in Q2, with a trade deal with the US only reached on July 23. Under this deal, Japan faces a blanket 15% tariff on all exports to the US, including cars.

Interest Rate Outlook

Following the GDP data, market pricing for a September BoJ rate hike of 25 basis points rose from 38% to 45%.

Investors await more data on inflation, unemployment, and wages to refine those expectations.

Minutes from the BoJ’s June policy meeting showed some board members would consider resuming rate hikes if trade tensions eased.