The Dollar fell on Friday, yet the Euro edged up following sharp losses overnight as traders digested data showing inflation was easing, fuelling expectations rates had reached a peak and central banks would soon begin slashing rates.

The Dollar index – measuring the currency against six peers – was down 0.116% at 103.33, after registering its weakest monthly performance in a year last month, despite a 0.6% overnight jump, Reuters reports.

US consumer spending moderately increased in October, whilst the annual rise in inflation was the smallest in over two and a half years.

The personal consumption expenditures (PCE) price index increased 3% in October compared to last year, moderating from a three-month run of readings of 3.4%, yet remaining above the Federal Reserve’s 2% target.

“While the 3% level remains too high to declare victory on inflation, it marks a new low for the series that will likely please the Fed and alleviate any pressure to implement further hikes,” according to head of global capital markets, North America, at Validus Risk Management, Ryan Brandham.

“It remains to be seen if getting from 3% to 2% will be easy, or if inflation will remain sticky in 2024,” he added.

On Thursday, Fed policymakers signalled the central bank’s rate hikes have likely reached an end, but left the door open to additional monetary policy tightening should progress come to a halt.

“We expect Powell to reiterate the possibility of further tightening and dampen expectations of rate cuts,” said currency strategist at Commonwealth Bank of Australia, Carol Kong.

“Further loosening of financial conditions may undermine the FOMC’s efforts to tame inflation pressures. That said, we do not expect the FOMC to tighten policy again.”

Elsewhere, eurozone inflation fell more than forecast in November for the third consecutive month, stoking bets of rate cuts in early Spring, Reuters reports.

Following the data, the Euro edged down 0.7% on Thursday, but at the time of writing was up 0.21% at $1.0909.

Sterling was 0.14% higher on Friday at $1.264.

In Australia, the Dollar edged up 0.06% to $0.661, whilst the New Zealand Dollar increased 0.13% to $0.616.