The dollar was broadly weaker on Friday afternoon after fresh data from the Bureau of Economic Analysis revealed a surprise pick up in a key US inflation gauge.
The euro was changing hands at USD1.0746 on Friday afternoon London time, higher against USD1.0719 at the same time on Thursday.
The US core personal consumption expenditures index grew 4.7% year-on-year in April, picking up speed from 4.6% in March.
Annual core PCE, the Fed's preferred inflationary reading, had sat at 4.7% in each of January and February, following an uptick from 4.6% in December. It had then abated to the December level in March.
Another year-on-year reading of 4.6% was expected for April, according to FXStreet cited consensus, so the reading came in slightly hotter than forecast and has poured some cold water on hope that the Federal Reserve will soon cut interest rates.
Versus the Australian dollar, the US currency was priced at AUD1.5309, down from AUD1.5339. Against the Swiss franc, the dollar was priced at CHF0.9032, down from CHF0.9066.
On Thursday, minutes from the latest US Federal Reserve meeting showed officials were "less certain" about whether to enact further increases to interest rates.
Members expressed uncertainty about how much more policy tightening may be appropriate, with "many participants focused on the need to retain optionality after this meeting."
According to the CME's FedWatch Tool, markets see a 43% chance of rates remaining the same at the Fed's next meeting in July. Only one week ago, markets saw an 83% chance for this outcome.
Meanwhile, versus the Japanese yen, the dollar was trading at JPY140.05 in London, higher against JPY139.72. Against the Canadian loonie, the dollar traded at CAD1.3622, higher against CAD1.3604.
The pound was quoted at USD1.2374 on Friday afternoon, up from USD1.2347 on Thursday afternoon.
Sterling was on the up after a better-than-expected monthly retail sales reading, as well as the prospect of more Bank of England rate hikes.
UK Chancellor Jeremy Hunt has backed interest rate hikes being used to calm soaring inflation, even if they increase the risk of pushing the UK into recession.
Hunt told Sky News that prioritising measures to slow rising prices was necessary, even if rate hikes damage the UK's gross domestic product.
The chancellor's rhetoric followed hawkish talk from a member of the Bank of England's decision-making body on Thursday, who said that the central bank cannot rule out more rate rises.
"As difficult as our current circumstances are, embedded inflation would be worse," Jonathan Haskel told an audience in Washington DC, a day after the UK inflation rate was revealed to have hit 8.7% in April.
"The [Monetary Policy Committee] remains committed to bringing inflation sustainably back to the 2% target, and that is what we will do. But to do this, further increases in Bank rate cannot be ruled out," Haskel said.
Against the euro, sterling was trading at EUR1.1514, virtually unchanged from EUR1.1516.
UK retail sales edged up on a monthly basis in April. For many, this was a tentative sign that the year-long retail slump seen in 2022 may now be in the rearview.
The Office for National Statistics estimated that retail sales volumes in April rose 0.5% from the previous month, after a downwardly revised fall of 1.2% in March.
The reading was slightly higher than the FXStreet-cited market consensus of 0.3%. March was initially reported to have seen a 0.9% fall in retail sales.
"Following months of consumers tightening their belts to the detriment of retailers, April's uptick in spending suggests that there is light at the end of the tunnel for the businesses hit hardest by the cost-of-living crisis' impact on sales," said Phil Monkhouse, head of sales at Ebury.
However, some were less impressed by the numbers: "April's modest recovery in retail sales volumes failed to reverse all of March's decline and suggests that the trend still is effectively flat, as households' finances continue to feel the strain of rapid price rises and increasing interest rates," said Pantheon Economics senior UK economist Gabriella Dickens.