The U.S. dollar held flat near a one-week high against major peers on Friday as investors stood on the sidelines ahead of Federal Reserve Chair Kevin Warsh's speech at the Jackson Hole symposium for clues on his policy outlook. The dollar index, which measures the currency against six major peers, was holding above the 99 mark in early Asian trade, supported by higher than expected inflation levels. The dollar has risen 0.3% this week but remains on track for a second straight monthly decline of 0.7% after U.S. Treasury Secretary Scott Bessent said the Treasury would increase buybacks of longer-dated bonds, fuelling concerns that efforts to suppress borrowing costs could debase the dollar. Escalating economic sanctions aimed at isolating Iran's banking and trade networks have also sparked defensive safe-haven demand for the US currency, providing additional support for the greenback. EUR/USD pair is quoting at 1.1649, down marginally on the day but holding around one and half week low, having eased marginally this week after rising around 1% in the previous week.
US weekly initial jobless claims fell for a second straight week to a seasonally adjusted 203,000, below the 208,000 estimate of economists polled by Reuters, as reported by Reuters. However, US goods trade deficit widened to $118.8 billion in July from $101.4 billion in June, marking the largest goods trade gap since March 2025. US PCE Price Index remained unchanged at 3.7% on year in July, above the consensus of 3.6%, with both the PCE Price Index and core PCE Price Index rising by 0.2% monthly. This sticky inflation data has reinforced expectations for Federal Reserve policy tightening. Markets are now pricing in roughly 35% odds of a rate hike at the Fed's September meeting, rising to 75% by December, according to The Economic Times. The attention will shift to Federal Reserve Chairman Kevin Warsh's speech at the Jackson Hole symposium on Friday, with many market participants expecting him to refrain from offering monetary policy guidance, though his opposition to providing explicit forward guidance on rates has tempered expectations.
Elevated readings in European inflation data also supported the single currency, with a renewed jump in energy prices in August leading to strong accelerations in inflation across France and Spain. Spain's EU-harmonised consumer price index increased at a year-on-year rate of 4.5% in August, up sharply from 3.9% in July, marking the highest inflation rate in over three years. In France, the annual change in the EU-harmonised CPI jumped to 2.7% this month from 2.4% in July, hitting its highest level since May, according to INSEE data. This sharp uptick in European inflation data has provided additional support for the euro and contributed to the currency's resilience in the current trading environment.
Analysts at Investing.com note that EUR/USD has gained 2.51% over the past month but failed to reclaim the August high at 1.1711, turning and spending three sessions grinding lower. The pair dipped to 1.1650, rose to 1.1679 before settling at 1.1646, showing upward momentum that is starting to build albeit tentatively. The dollar index recovered to 99.18, up 0.05% on the day after printing 98.55 on August 22 - its lowest level since mid-May. The dollar index has been carving lower highs and lower lows since late July, with oscillator signals showing moderation in the decline but no reversal signature. The Relative Strength Index (14) reads near 67 - firm positive territory, strong upside momentum, but short of the 70 overbought threshold. That reading is constructive rather than exhausted, which distinguishes EUR/USD from gold and Bitcoin, both of which entered this week with oscillators pinned above 80. Initial support sits at 1.1622, the June 15 high, now converted to support on the retest, with the pair holding above the 20-day exponential moving average at 1.1577.
On the NSE, EUR/INR futures are down marginally at 111.63, as reported by Business Standard. The Indian rupee has firmed up against major currencies after recent losses, providing some support to the domestic currency against the euro. This movement in the EUR/INR pair reflects the broader currency dynamics affecting both the European and Indian markets in the current trading session. The euro's 57.6% weight in the dollar index basket means EUR/USD and DXY are close to mechanically inverse, with the dollar index at 99.18 sitting 52 basis points above the August 22 low and 233 basis points below the July peak.
