The US Dollar Index is trading at 102.747, paring its morning losses after the release of US Producer Price Index inflation data, which indicated an annual rate of 1.80%, with the previous reading revised to 1.90%.

The US dollar continues to move higher despite caution from some investment banks about this rise: UBS: The US dollar is rising strongly.. Is this rise sustainable?

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The US dollar traded with slight losses on Friday, but remained on track for weekly gains as traders reassessed potential Fed rate cuts in the wake of strong payrolls figures.

At 04:30 ET (08:30 GMT), the dollar index, which measures the greenback against a basket of six other currencies, was trading down 0.2% at 102.594.

For the week, the index is heading for a 0.4% gain, building on last week's more than 2% gain.

The following producer price index data

The dollar has been in demand since last week's strong jobs report, with traders largely discounting the chance of another major interest rate cut by the Federal Reserve at its next meeting.

Although Thursday's surge in jobless claims raised some doubts about the health of the labor market, the rise in the consumer price index reminded traders that inflation may still be a problem.

US producer prices data is due later in the session and is likely to show slight gains, but there is a degree of uncertainty after consumer inflation came in slightly stronger than expected in September.

Currently, bets on a quarter-point Fed rate cut on Nov. 7 have increased to 83.3% from 80.3% the day before, with the odds of policy remaining steady, according to the CME Group (NASDAQ:CME) Fed Tracker.

UK economy returns to growth

In Europe, GBP/USD rose 0.1% to 1.3068, after data showed the UK economy returned to growth in August after two straight months of no growth.

UK GDP rose by 0.2% month-on-month in August, broadly in line with expectations, and grew by 1.0% compared to a year earlier.

The UK economy now looks set to post a third straight quarter of economic growth. The Office for National Statistics said September GDP data should show a monthly decline of 0.3% to 0.6% to produce a flat quarterly reading, assuming no revisions to the current figures.

The euro rose 0.1% to 1.0944 The Federal Statistics Office said on Friday that inflation rose 0.1% to 1.0944, after consumer inflation in Germany fell to 1.8% in September, the Federal Statistics Office said on Friday, confirming preliminary data.

With inflation in the euro zone's largest economy now below the European Central Bank's target and growth stagnating, the ECB is widely expected to ease policy again next week, having already cut interest rates twice this year.

“While the arguments against a rate cut should not be dismissed out of hand, it now takes a lot of courage for the ECB to hold rates, given that markets and consensus are fully aligned on a 25bp cut,” analysts at ING said in a note.

Yuan gains before the briefing

The yen (USD/JPY) fell 0.1% to 148.75, after approaching 150 yen earlier in the week, a level not seen since Aug. 2.

The yuan USD/CNY fell 0.2% to 7.0672, with the yuan slightly higher ahead of an upcoming finance ministry briefing, where the government said it will outline fiscal stimulus plans.

Analysts expect Beijing to allocate at least 2 trillion yuan ($283 billion) in fiscal support, with the bulk of the amount targeted to support private consumption.