By Peter Nurse 

- The U.S. dollar steadied near its seven-week low in early European trade Friday as traders contemplated the Federal Reserve's next move as confidence in the banking sector remained fragile.

At 03:55 ET (07:55 GMT), the , which tracks the greenback against a basket of six other currencies, traded marginally higher at 102.243, just above the seven-week low of 101.91 it touched on Thursday. 

U.S. Treasury Secretary Janet Yellen reiterated on Thursday that she was prepared to take further action to ensure that Americans' bank deposits stay safe.

This is a stance that she may well have to honor as strains are showing with borrowing at the Federal Reserve's discount window a hefty $110.2 billion as of Wednesday. 

Additionally, lending from the Fed's new Bank Term Funding Program ballooned to $53.7B, while loans to foreign central banks surged to $60B.

With this in mind, the market is beginning to position for the Fed ending its rate-hiking cycle earlier than previously envisaged, to the detriment of the dollar, particularly after Fed Chair Jerome Powell indicated that the central bank policymakers had considered such a move last week.

"Markets are, so far, not trusting the ability of the Fed to treat inflation and financial stability independently," said analysts at ING, in a note. "This looks unlikely to change soon, which means that rate expectations should remain strictly tied to developments in the banking crisis."

Elsewhere, traded 0.1% lower at 1.2271, having touched a seven-week high of 1.2344 on Thursday.

U.K. unexpectedly rebounded by 1.2% in February from the month before, returning sales volumes to their pre-pandemic level, but this is having little impact on sterling after the hinted on Thursday that it may have ended its run of rate hikes.

edged higher to 1.0833, having climbed to a seven-week high of 1.0931 on Thursday.

European Central Bank President Christine Lagarde is set to speak at the European Council meeting later in the session and is expected to confirm that the battle against remains alive and there won't be any talk of loosening policy in the near term.

"We think that 1.1000 [in EUR/USD] can be tested quite soon as the dollar bias should stay mostly bearish and European currencies are backed by hawkish central banks and a quieter banking environment," ING added.

traded 0.1% higher at 0.6691, fell 0.4% to 130.26, while rose 0.4% to 6.8487.