The euro rose against a basket of global currencies in European trading on Friday, extending its move into positive territory for a second consecutive day against the US dollar after softer-than-expected US inflation data reduced expectations for interest rate hikes this year.

Meanwhile, the renewed rise in global oil prices this week has increased inflationary pressures on European Central Bank policymakers, strengthening expectations for a potential European interest rate hike in September.

The Price

The euro rose 0.25% against the dollar to $1.1554, from the opening level of $1.1528, after recording a session low of $1.1525.

The euro ended Thursday up less than 0.1% against the dollar, its first gain in four sessions, following weak US producer price and jobless claims data.

US dollar

The US Dollar Index fell more than 0.1% on Friday, extending losses for a second consecutive session and reflecting continued weakness in the US currency against a basket of major and minor currencies.

The dollars decline came after US inflation data released this week showed easing inflationary pressures on Federal Reserve policymakers, reducing expectations for US interest rate hikes this year.

European interest rates

With oil prices rising this week, money markets have increased the probability of a 25-basis-point European Central Bank interest rate hike in September to 50%, from 35%.

Investors are awaiting further Eurozone economic data on inflation, unemployment and wages to reassess those expectations.

Euro outlook

Markets are awaiting further US consumer spending data later today. Additional weak economic readings would further reduce expectations for Federal Reserve interest rate hikes this year, potentially supporting further gains in the euro against the US dollar.