Euro Struggles as Dollar Rises on Warsh's Warning

The European Central Bank (ECB) has largely won the argument about raising interest rates in September, with inflation held at 3.3% as expected.

However, the ECB's tightening is being pulled in opposite directions by the US dollar and the eurozone economy. The dollar received a boost from Kevin Warsh's defense of the Fed's willingness to keep financial conditions restrictive.

The rebound in oil prices is hitting Europe harder than the US, making it harder for the eurozone to solve its inflation problem. This has strengthened the dollar through the terms-of-trade channel.