(Updated in New York afternoon time)

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Fed officials cautious on further easing due to inflation

concerns

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US data return expected to increase market volatility

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Pound falls after UK tax policy shift

By Karen Brettell

NEW YORK, Nov 14 (Reuters) - The dollar gained on the

euro and was roughly flat against the yen on Friday as stocks

recovered from a sharp selloff and traders weighed whether the

Federal Reserve is likely to cut rates in December.

A flood of data that was delayed during the federal

government shutdown is pending release starting next week.

Risk sentiment has been dented by concerns about lofty stock

valuations and Fed policy, but the S&P 500 and Nasdaq Composite

stock indexes rebounded on Friday. The greenback had weakened on

Thursday even as stocks dropped and Treasury yields climbed.

More Fed officials have signalled caution over further easing,

citing worries about inflation. Fed funds futures are pricing in

only a 41% chance of a 25-basis-point cut in December.

RETURN OF DATA SEEN BOOSTING VOLATILITY

Markets are "disjointed because of the lack of data and the

people reacting to the Fed speakers," said Lou Brien, strategist

at DRW Trading in Chicago.

The return of U.S. data is likely to increase market volatility,

which has ebbed in recent weeks in its absence. The Commerce

Department's Bureau of Economic Analysis said on Friday it was

working to update its schedule of economic data releases

affected by the recently ended government shutdown.

Bank of America foreign exchange strategists Adarsh Sinha

and Claudio Piron note that volatility has also declined as

interest rate differential volatility reached fresh lows, which

was driven by some central banks, including the European Central

Bank, approaching the end of their easing cycles.

Now, "we expect rate differential (and therefore FX)

volatility to rise as US data releases resume, not to mention

the considerable uncertainty around the rate paths of the (Bank

of England) and (Bank of Japan)," they said.

The dollar index, which measures the greenback

against a basket of currencies including the yen and the euro,

rose 0.07% to 99.31, with the euro down 0.12% at $1.1617.

Against the Japanese yen, the dollar weakened 0.02%

to 154.52.

The pound tumbled against both the dollar and the euro after

media reports, including from Reuters, that British Prime

Minister Keir Starmer and Finance Minister Rachel Reeves have

abandoned plans to raise income tax rates, marking a sharp shift

just weeks ahead of the November 26 budget.

The British currency was last down 0.24% at $1.3158. The

euro hit its highest rate to the pound since April 2023.

Against the Swiss franc, the dollar strengthened

0.15% to 0.794. It earlier weakened to a one-month low of 0.7876

as traders rushed into the safe haven Swiss currency.

The Swiss government also said on Friday that the United States

will slash its tariffs on goods from Switzerland to 15% from a

crippling 39% under a new framework trade agreement.

In cryptocurrencies, bitcoin fell 3.41% to $95,433,

the lowest since May.