Euro Bounces as Traders Weigh Fed-ECB Interest Rate Outlooks
The Euro (EUR) trimmed its intraday losses on Thursday as traders weighed the interest rate outlooks of the Federal Reserve (Fed) and the European Central Bank (ECB). The EUR/USD pair traded around 1.1658, recovering from an intraday low of 1.1636 but remained below the three-month high of 1.1711 touched earlier in the week.
The US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, retreated from its intraday high of 99.26 to trade around 99.05.
Traders expect the Fed to keep interest rates higher for longer due to sticky US inflation, with the possibility of a rate hike not entirely ruled out. However, an imminent move is not the base case, with the CME FedWatch Tool showing around a 62% chance that the central bank will leave borrowing costs unchanged in September.
Looking ahead to Fed Chair Kevin Warsh's speech at the Jackson Hole Symposium on Friday for fresh guidance on the interest rate path. Kansas City Fed President Jeff Schmid said, 'the energy shock is leaking into the economy and stressed that the Fed needs to return inflation to 2%.'