Bank of America just raised its EUR/USD forecast
Investing.com - The U.S. dollar drifted marginally higher Thursday, just off a one-week high as traders braced for the start of the Federal Reserve’s annual Jackson Hole symposium.
At 04:40 ET (08:40 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% higher to 98.114, after climbing to its highest level since August 12 in the prior session.
Fed minutes loom large
The U.S. currency received some support overnight after the minutes of the last Federal Reserve meeting, released on Wednesday, indicated that the majority of policymakers still remained concerned about the labor market and inflation, as the two members who dissented against the U.S. central bank decision’s to leave interest rates unchanged last month appear not to have been joined by other policymakers.
"Almost all participants viewed it as appropriate to maintain the target range for the federal funds rate at 4.25% to 4.50% at this meeting," the minutes of the July 29-30 meeting said. later in the session.
The Fed has maintained its policy rate in the 4.25%-4.50% range for all of this year, with some policymakers, and Powell in particular, expressing worries that the Trump administration’s tariffs could reignite inflation.
Weekly jobless claims are due later in the session, and are expected to show a slight deterioration in the labor market, following on from the weak payrolls release at the beginning of the month.
However, trading ranges are likely to be limited Thursday as investors braced for three days of potentially market-moving news from Jackson Hole.
“We’re all waiting on tomorrow’s speech from Fed Chair Jerome Powell as to how significantly the Fed registered the substantial downward revisions to back-month job data,” said analysts at ING, in a note.
“Before then …we’ll have a speech from the Fed’s Raphael Bostic. He’s recently been saying he could vote for a rate cut soon, although one rate cut this year is his preferred adjustment.”
Euro helps by PMIs
In Europe, EUR/USD gained 0.1% to 1.1656, boosted to a small degree by data showing eurozone businesses saw new orders increase for the first time since May 2024 in August, helping overall activity expand at the fastest pace in 15 months despite persistent weakness in exports.
The HCOB Flash Eurozone Composite Purchasing Managers’ Index, compiled by S&P Global, rose to 51.1 in August from 50.9 in July, marking the third consecutive monthly improvement and the highest reading since May 2024.
PMI readings above 50.0 indicate growth in activity while those below point to a contraction.
“EUR/USD is becalmed. It’s fair to say that the optimism over a potential ceasefire/peace deal in Ukraine is now fading,” said ING. “We may see another tight 1.1620-1.1670 trading range in EUR/USD today, with the biggest chance of a breakout remaining Powell’s speech tomorrow.”
GBP/USD traded 0.1% higher to 1.3466, after broadly positive U.K. activity data.
The U.K. Composite Purchasing Managers’ Index rose to 53.0 in August from 51.5 in July, higher than the expected 51.6.
Calm in Asia
Elsewhere, USD/JPY traded 0.1% higher to 147.55, after data showed that the country’s factory activity contracted at a slower pace in August, nearing a return to growth.
USD/CNY gained slightly to 7.1769, largely unchanged the day after the People’s Bank of China left its benchmark loan prime rates steady.
AUD/USD dropped 0.1% to 0.64234, while NZD/USD stabilized at 0.5822 the day after falling to its lowest level since mid-April after the Reserve Bank of New Zealand trimmed the official cash rate by 25 basis points.