Asian session: The dollar traded 0.3 percent from a two-week low against the euro

The dollar traded 0.3 percent from a two-week low against the euro before data today forecast to show the U.S. economy expanded at the slowest pace in a year. U.S. gross domestic product, the value of all goods and services the nation produced, probably expanded at a 1.4 percent annual rate after a 1.9 percent gain in the previous quarter, according to the median forecast of economists surveyed by Bloomberg News ahead of today’s data.

The greenback headed for a weekly loss versus most of its major peers amid speculation the Federal Reserve will engage in a third round of quantitative easing, or QE3. Fed Chairman Ben S. Bernanke said last week that policy makers are “looking for ways to address the weakness in the economy should more action be needed to promote a sustained recovery in the labor market.” The Fed will hold a two-day policy meeting starting July 31.

The euro maintained a two-day advance against the dollar and yen after European Central Bank President Mario Draghi said policy makers will do whatever is needed to preserve the 17-nation currency.  Yesterday’s pledge by ECB President Draghi prompted speculation policy makers may be preparing to unveil new measures to fight the region’s debt crisis as potential bailouts for economies the size of Spain and Italy threaten to overwhelm Europe’s rescue funds. Draghi delivered his remarks at the Global Investment Conference in London, saying surging sovereign-bond yields may fall within the ECB’s jurisdiction. Spanish 10-year rates have exceeded the 7 percent level that prompted bailouts for Greece, Portugal and Ireland.

The yen was lower against most of its major counterparts after government data showed Japan’s consumer price index declined, evidence that the nation is struggling to defeat deflation.

Consumer prices excluding fresh food fell 0.2 percent in June from a year earlier, the statistics bureau said in Tokyo today. The median estimate of 29 economists surveyed by Bloomberg was for no change. Bank of Japan (8301) Governor Masaaki Shirakawa has said the central bank will pursue “powerful monetary easing” until its 1 percent inflation goal set in February is in sight.

Australia’s dollar rose as Asian shares headed for their biggest gain this month, supporting demand for riskier assets.

EUR/USD: during the Asian session the pair rose to yesterday's highs.

GBP/USD: during the Asian session the pair rose to $1.5700.

USD/JPY: during the Asian session the pair traded in a range of Y78.15-Y78.35.

European data for Friday includes the German flash HICP data for July, which is expected to come in at 0.4% m/m, 1.9% y/y. The France

consumer confidence survey for July is due at 0645GMT with Italy releasing the ISTAT business survey at 0800GMT. US: data starts at 1200GMT with the Building Permits Revision for June, followed at 1230GMT by second quarter GDP, which is expected to rise 1.4%, compared with the 1.9% rise in the previous quarter.  At 1355GMT, the Michigan Sentiment Index is expected to be unrevised at 72.0 in July. US Housing Vacancies are due at 1400GMT, while late data sees the 2015GMT release of C&I Loans. MT with Italy releasing the ISTAT business survey at 0800GMT.