The euro slipped to a one-week low near $1.1650 on Thursday as the dollar held its recent gains a day ahead of Fed Chair Kevin Warsh's Jackson Hole speech. Euro-area policymakers flagged one more likely rate hike, while sticky U.S. inflation data kept traders guessing on the Fed's next move.
Euro slips as dollar holds firm before Warsh speech
The euro traded just under the flatline at $1.1650, languishing at over a one-week low. The U.S. dollar index held flat at 99.15. The dollar has rebounded 0.35% this week after an 0.83% drop the prior week, when Treasury Secretary Scott Bessent's plan to double quarterly repurchases of longer-dated bonds stirred debasement-trade fears.
According to Investing.com: "The FX market, honestly, is in a bit of a trance," said Erik Bregar, director of FX and precious metals risk management at Silver Gold Bull in Toronto. Traders are largely holding positions ahead of Federal Reserve Chair Kevin Warsh's keynote address at the Jackson Hole symposium on Friday, where investors will watch for signals on how policymakers plan to navigate higher Treasury yields.
ECB accounts point to one more hike
Accounts of the European Central Bank's July meeting showed policymakers anticipated they would probably need to raise interest rates one more time to address the impact of the Iran war. The ECB had held rates steady in July after hiking in June for the first time in nearly three years.
Sticky U.S. inflation clouds the rate outlook
Wednesday's data showed the Fed's preferred inflation gauge, the core PCE price index, ticked up 0.2% month-on-month and 3.3% year-on-year in July, matching expectations but still well above the Fed's 2% target. A second estimate of Q2 U.S. GDP growth was unchanged at 1.5%.
That data briefly lifted expectations for a September rate hike above 40%, but odds slipped back to 35.9% on Thursday, according to CME FedWatch. Weekly jobless claims, meanwhile, fell to 203,000, below the 208,000 estimate, while the U.S. goods trade deficit widened to $118.8 billion in July from $101.4 billion in June, the largest gap since March 2025.
Sources: Investing.com, Reuters via Investing.com
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