The US Dollar (USD) maintained its recent gains on Thursday, trading near 99.00 on the US Dollar Index (DXY) in the early European session, following the release of the US Personal Consumption Expenditure (PCE) Price Index for July, which showed persistent inflation pressures [1][3]. The core PCE inflation, the Federal Reserve’s (Fed) preferred gauge, came in at 3.3% year-on-year (YoY), matching both estimates and the previous reading, while the headline PCE rose 3.7% YoY, exceeding the expected 3.6% [1][2][3]. On a monthly basis, the PCE increased by 0.2% after a 0.1% decline in June, surpassing the consensus of 0.1% growth [2].
Despite the hotter-than-expected inflation data, market expectations for the Fed’s September policy meeting remained largely unchanged, with the CME FedWatch tool indicating a 64% probability that the Fed will leave interest rates unchanged [1][3]. Strategists at DBS and other analysts highlighted that the upcoming Jackson Hole Symposium, where Fed Chairman Kevin Warsh is scheduled to speak, is being viewed as a key event for market participants, though it is seen more as a credibility event than a direct signal for rate changes [1][3]. Economists at DBS Group Research noted that Warsh faces a challenging task in balancing Fed independence, price stability, and the need for policy clarity without providing excessive forward guidance [1][3].
The Euro (EUR) strengthened against the USD, with EUR/USD trading near 1.1655, buoyed by a hawkish stance from the European Central Bank (ECB) and expectations of a rate hike in September. Markets are pricing in a 96% probability that the ECB will raise the deposit rate to 2.50% at its next meeting, supported by comments from ECB Executive Board member Isabel Schnabel, who cited upside inflation risks from geopolitical tensions and resilient Eurozone growth [2]. Technical analysis suggests a bullish bias for EUR/USD, with the pair holding above key moving averages [2].
In Asia, the Indian Rupee (INR) opened flat against the USD, with USD/INR near a 10-day low of 95.40. Lower oil prices initially supported the INR, but the USD’s recovery following the PCE data offset these gains [3]. Meanwhile, the USD/JPY pair turned positive for the fourth consecutive day, trading near a weekly high around 159.00–159.65. The pair’s gains were attributed to the strong US Dollar and the wide US-Japan rate gap, with technical indicators suggesting further upside potential if the pair breaks above the 50% Fibonacci retracement level at 159.63 [4].
Across markets, the slightly hotter US inflation data reaffirmed market bets for at least one Fed rate hike in 2026, though immediate rate expectations for September were unchanged [4]. The Jackson Hole Symposium and Fed Chair Warsh’s speech remain the focal points for traders seeking clues on the Fed’s future policy path [1][2][3][4].
CONCLUSION
The US Dollar remains supported by persistent inflation data, with markets awaiting further guidance from the Jackson Hole Symposium and Fed Chair Warsh’s remarks. While immediate Fed rate expectations are steady, the event is seen as crucial for policy credibility and future direction. Meanwhile, the Euro is buoyed by hawkish ECB rhetoric, and technical setups across major currency pairs suggest continued volatility as traders digest central bank signals.