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Investing.com – The U.S. dollar fell in early European trading on Friday but was on course for a third straight weekly gain as expectations for a U.S. rate hike rose.

At 03:15 ET (07:15 GMT), the greenback, which tracks the greenback against a basket of six other currencies, was down 0.1% at 104.040, below Thursday’s two-month high of 104.31.

Despite Friday’s minor losses, the U.S. currency is still on course for a weekly gain, its third in a row, of less than 1% as traders bid for longer U.S. interest rates.

Data released on Thursday showed that the number of Americans filing rose slightly to 229,000 last week, while first-quarter growth improved to 1.3% from 1.1%.

Focus is going to be on Friday’s release, the closely watched inflation barometer, which the Federal Reserve will be watching closely as it heads into the June policy meeting.

With inflation proving sticky, expectations for another rate hike in June are rising, with futures traders almost evenly split between expecting a rate hike and a pause.

The dollar gained a boost this week against its safe haven as the US government failed to reach a deal to lift the $31.4 trillion debt ceiling as an early June deadline loomed.

The two sides appeared to have reached an agreement, Reuters reported late Thursday, but any deal would have to pass the Republican-controlled House of Representatives and the Democratic-controlled Senate.

Elsewhere, it edged higher to 1.0731, hovering near a two-month low, even as authorities hinted at further interest rate hikes to tackle still-high inflation.

Bundesbank President Joachim Nagel said: “We have acted decisively in the Eurosystem to drive down inflation.” The Governing Council of the ECB will continue with this monetary policy to overcome high inflation.

The British pound rose more than expected in April, rising 0.2% to 1.2344, up 0.5% from March, better than expectations of 0.3% and an improvement on last month’s 1.2% decline.

It will raise interest rates once again next month, with Italy remaining the highest in the G7 and consumer spending showing some resilience.

It fell 0.2% to 139.78, below a six-month high, as softer-than-expected data on Friday raised hopes that the Bank of Japan will end tightening policy this year.

It rose 0.3% to 0.6522, fell 0.4% to 7.0524, rebounding from a near six-month high, but remains well above the key 7 level.

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