Investing.com - The dollar was broadly weaker against a basket of the other major currencies on Friday after data showing that U.S. economic growth accelerated in the second quarter, but wage growth remained sluggish.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, ended down 0.61% at 93.20, the lowest close since June 22, 2016.
The index has fallen around 2.3% so far this month and is down around 9% for the year to date.
The Commerce Department said Friday that gross domestic product increased at an annual rate of 2.6% in the three months to June, which included a boost from consumer spending. That was more than double the 1.2% growth seen in the first quarter.
But separate reports showed that wage growth and inflation remained subdued in the second quarter.
The Labor Department said wages and salaries increased 0.5% after accelerating 0.8% in the first quarter.
The Fed's preferred inflation gauge, the personal consumption expenditures (PCE) price index excluding food and energy, increased at a 0.9% rate, the slowest increase in over two years.
The subdued inflation outlook has raised doubts over whether the Federal Reserve will be able to stick to plans for a third interest rate hike this year.
The Fed left rates on hold on Wednesday and said it expected to start shrinking its balance sheet "relatively soon."
Declining expectations for fiscal stimulus under the Trump administration have also fed into recent dollar weakness.
The euro rose against the dollar on Friday, with EUR/USD up 0.63% at 1.1749, not far from the two-and-a-half year highs of 1.1775 set on Thursday.
The euro has risen 2.84% against the dollar so far this month and has gained around 11% for the year to date, making it the best performing major currency against the dollar.
The euro has been boosted by expectations that the European Central Bank will soon start to wind down its stimulus program.
The dollar fell to six-week lows against the yen, with USD/JPY down 0.5% at 110.68 late Friday.
In the week ahead, investors will be focusing on Friday’s U.S. jobs report for fresh indications on the possible direction of Federal Reserve policy through the end of the year.
Central bank meetings in the UK and Australia will also be in focus. Meanwhile, the euro zone is to release preliminary data on inflation and second quarter growth.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.
Monday, July 31
China is to release data on manufacturing and service sector activity.