Euro: Warsh speech weighs on EUR against US Dollar – Danske Bank

Federal Reserve Chair Kevin Warsh's hawkish Jackson Hole speech weighed on the EUR against the US Dollar, pushing EUR/USD lower. Markets now view September as nearly a coin-flip for a rate hike, with the Dollar strengthening across the board. Warsh emphasized that the 2% PCE target remains firm and that more work is needed if inflation doesn't move toward target quickly enough.

This tone marks a shift from his July press conference, where he highlighted the role markets play in determining interest rates. Meanwhile, Fed member Anne Hammack also adopted a hawkish stance, urging immediate action on rate hikes and warning that waiting could exacerbate inflation. The focus now turns to German flash inflation figures for August, with expectations of a 3.1% year-over-year increase, driven by energy prices.

Traders will be watching for momentum in underlying inflation, which remained unaffected by energy shocks in previous data from Spain and France. The upcoming US labour market report and eurozone inflation data will also be crucial for market sentiment.