By Peter Nurse

Investing.com – The US dollar plunged to a year-low at the start of trading on Friday in Europe on rising expectations that cooler-than-expected inflation data will bring an end to the tightening cycle soon. Federal Reserve rates.

By 08:00 AM ET (0800 GMT), the , which tracks the currency against a basket of six other major currencies, was down 0.2% at 100.515, hitting levels not seen since April last year.

The index is on track to post a weekly drop of more than 1%, the steepest since January.

These dollar losses come after the publication of the March report from the United States, which fell 0.5% compared to the previous month, its biggest drop since the start of the pandemic.

The PPI has slowed in annual terms, rising 2.7% compared to a year ago, its smallest advance in more than two years, while the , which excludes the volatile components of food and energy, fell 0.1% compared to February and rose 3.4% compared to a year ago.

These figures are published just one day after they registered their smallest annual increase since May 2021.

The US is still expected to raise interest rates again next month, probably just 25 basis points, but expectations are rising that the US central bank will cut interest rates before the end of the year.

“It seems that investors welcome the next easing cycle of the Fed (after a last hike in May), they are convinced that the dollar will weaken and they are looking for opportunities,” ING (AS:) analysts say in a note.

More economic data is released this Friday, the most prominent of which is for March, which is expected to indicate a monthly contraction of 0.4%, the same as the previous month, as consumers battle inflation that limits their income available.

The pair rises 0.2% to the 1.1069 level, posting fresh 1-year highs, after data released on Thursday showed rates holding high, suggesting further rate hikes. of interest for longer than its US counterpart.

The ECB needs to keep raising interest rates, Governing Council member Pierre Wunsch said on Thursday, and market expectations for another 75 basis point hike are “reasonable” but expectations for a rate cut are not. by the end of the year.

“I think that in May the increase will be about 25 or 50 basis points,” said Wunsch. “If there’s another surprise to the upside in core inflation and the (ECB quarterly) loan survey doesn’t turn out too bad, it may have to be 50.”

This Friday we will know more inflation data, such as consumer prices for March and .

The pair is aiming for a 0.1% rise to the 1.2535 level, registering a 10-month high, and everything indicates that the will raise interest rates again in May, as UK inflation remains in two figures, after surprising by accelerating to 10.4% in February.

“The weaker dollar is keeping GBP/USD close to the 1.2500 level and it looks like the pressure is building for it to reach 1.2650/2750, again driven by the dollar,” adds ING.

Elsewhere, the pair is largely unchanged at 0.6782, but the Aussie is poised to rally 1.7% this week as a considerably stronger-than-expected jobs report has spurred bets that the Reserve Bank could still .

The pair fell 0.1% to the 132.50 level, while the pair fell 0.5% to 6.8382, with the yuan boosted by PBOC Governor Yi Gang’s reiteration of the 5 target. % of GDP by 2023.