Warsh Hawkish Tone Weighs on Euro Amid September Rate Hike Bets

The recent hawkish tone from Federal Reserve Chair Kevin Warsh at Jackson Hole has put pressure on the Euro against the US Dollar. In his speech, Warsh reaffirmed that the 2% PCE target is 'firm' and 'fixed,' signaling that more work remains to be done if inflation does not move towards this target with sufficient speed.

This stance represents a step away from Warsh's previous tone in July, where he emphasized markets' role in determining the direction of rates. The hawkish remarks sent EUR/USD lower, with markets now pricing September as nearly a coin-flip for a rate hike.

Additionally, Fed's Hammack called for immediate action on rate hikes and warned that waiting risks creating further pain. She expects inflation to end the year around 3%, well above the 2% target, and does not view current financial conditions as restrictive.