The U.S. dollar steadied in early European trade Friday after gains on the back of strong U.S. growth data, while the euro retreated in the wake of the latest European Central Bank meeting.

At 03:50 ET (08:50 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded flat at 103.372, on course for a small weekly gain after climbing about 0.2% overnight.

The dollar has generally retained the positive tone generated by Thursday's advance U.S. GDP estimate, indicating the U.S. economy grew at a 3.3% annualized rate in the last quarter of 2023, overshooting the consensus forecast of 2% growth.

The data pointed towards a soft landing for the U.S. economy this year after a period of severe monetary tightening. It also showed inflation pressures subsiding further, putting early Fed rate cuts back on the agenda, but the dollar managed to hold up as yields fell.

Later in the session comes the release of PCE price index data, the Fed's preferred inflation gauge, which could offer more cues on the bank's plans to cut rates.

The data comes just a few days before the Fed's first meeting in 2024, where the central bank is widely expected to keep rates on hold.

In Europe, EUR/USD traded 0.2% lower at 1.0827, with the euro on the backfoot following Thursday's European Central Bank monetary policy meeting.

The ECB kept interest rates unchanged at a record-high 4%, but the central bank recognised that inflation had fallen faster than it expected last autumn, suggesting that the time to start discussing a first rate cut is fast approaching.

GBP/USD traded 0.1% lower at 1.2693, with the Bank of England set to announce its latest decision on interest rates next week.

In Asia, USD/JPY rose 0.1% to 147.82, with the yen slightly lower as data showed consumer price index inflation in Tokyo fell more than expected in January, heralding a similar trend in countrywide inflation.

Source : Investing.com