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Dollar Static Ahead of Key CPI Release; Sterling Flat After GDP Data - The dollar was largely unchanged in early European trade Friday ahead of the release of key U.S. inflation data, which could influence Federal Reserve monetary policy thinking into the new year.

At 2:55 AM ET (0755 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was flat at 96.263, edging toward its seventh consecutive weekly rise.

USD/JPY rose 0.1% to 113.59, EUR/USD slipped 0.1% to 1.1288, while the risk-sensitive AUD/USD edged higher to 0.7151.

GBP/USD was flat at 1.3222, even after data showed the U.K. economy grew less than forecast in October, as traders kept their powder dry ahead of the U.S. inflation release.

U.K. gross domestic product grew just 0.1% from September, way below the forecast growth of 0.4%. This left the economy 0.5% smaller than in February 2020, before the pandemic struck, and further weakness looks likely given that the population faces new restrictions to contain the new strain of the Covid-19 virus.

U.S. consumer prices are due for release at 8:30 AM ET (1330 GMT), and economists are looking for a monthly gain of 0.7%, translating into annual price gains of 6.8%, the largest year on year increase since 1980.

This release will be seen as a prelude to next week’s meeting of the Federal Reserve, and expectations are running high that the central bank will outline a faster tapering of its bond-buying program, pointing to sooner interest rate rises, especially after Chairman Jerome Powell’s recent Congressional testimony.

Powell stated that it was time to retire the phrase ‘transitory’ while talking about high U.S. inflation, and also suggested it was appropriate to consider wrapping up net asset purchases a few months sooner than previously guided.

“The timing of his hawkish comments was interesting, and suggests that the Fed is more concerned about the inflationary consequences of the latest virus developments than their impact on growth,” said analysts at Nordea, in a note.

Elsewhere, USD/CNY fell 0.2% to 6.3664, with the yuan rebounding to a certain extent after recording its sharpest drop in months on Thursday when the People's Bank of China raised FX reserve requirements for the second time since June, moving to halt the currency’s recent rally.

USD/HUF rose 0.2% to 323.70 after Hungary’s central bank raised interest rates for a fifth time in less than a month on Thursday, hiking its one-week deposit rate by 20 basis points to 3.3%, in an attempt to rein in surging inflation.