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

Danske Bank research notes that EUR/USD faced downward pressure following hawkish rhetoric from Federal Reserve Chair Kevin Warsh during the Jackson Hole symposium. Warsh reaffirmed that the central bank's 2% Personal Consumption Expenditures (PCE) inflation target remains firm and fixed, indicating that policymakers still have work to do if inflation fails to cool with sufficient speed. This shift in messaging from his July press conference led financial markets to price the likelihood of a September interest rate hike as nearly a coin-flip. Adding to the hawkish momentum, Fed official Hammack advocated for immediate rate hikes, warning that policy delays risk inflicting further economic damage while projecting inflation to end the year near 3%. Meanwhile, European market focus shifts toward incoming macroeconomic data, notably the German flash August Harmonized Index of Consumer Prices (HICP) inflation reading, expected to rise to 3.1% year-over-year from 2.8%, alongside the broader Eurozone inflation release and the upcoming US nonfarm payrolls labor report.