The euro slipped in European trading on Friday against a basket of global currencies, moving into negative territory versus the US dollar ahead of key inflation data from Germany and Spain, which are expected to provide new signals on the path of European interest rates for the remainder of the year.

Over the course of August, however, the single currency remains on track to post a monthly gain, supported by expectations of at least two US rate cuts before year-end, alongside renewed concerns about the stability of the Federal Reserve.

Price Overview

EUR/USD fell 0.25% to $1.1656, from an opening level of $1.1683, after hitting an intraday high at the same level.

The euro had closed Thursday up 0.4% against the dollar, marking its second gain in the past three sessions, recovering from a two-week low of $1.1574.

European Interest Rates

Five sources told Reuters that the European Central Bank is likely to keep rates unchanged next month, though discussions of further cuts could resume in the fall if the eurozone economy weakens.

ECB President Christine Lagarde said at Jackson Hole last Saturday that the tightening policies adopted in 2022 and 2023 did not lead to a recession or sharp rise in unemployment as had historically been the case.

Money market pricing currently implies less than a 30% chance of a 25-basis-point ECB rate cut in September.

Investors are awaiting todays German and Spanish inflation releases for August, ahead of the full eurozone inflation report due early next week.

Monthly Performance

As August trading draws to a close, the euro is up 2.1% against the US dollar, set for its seventh monthly gain in the past eight months.

The monthly advance has been driven by expectations of a US rate cut in September, particularly after cautious remarks from Fed Chair Jerome Powell at the Jackson Hole symposium.

Safe-haven flows have also provided support amid growing concerns over Fed independence, following President Donald Trumps unprecedented move to dismiss Governor Lisa Cook, a step seen as undermining confidence in the central bank and US assets.

Outlook for the Euro

At Economies.com, we expect that if German and Spanish inflation prints come in hotter than anticipated, market odds of a September ECB rate cut will fall, which could lift the euro once again against a basket of global currencies.