The euro slipped at the open of European trading on Friday to a two-week low against the US dollar, extending losses for a second consecutive session and heading for a weekly decline. The move came as investors focused on buying the greenback as the best available investment, particularly after expectations of a Federal Reserve rate cut in September receded.

Expectations for a European Central Bank rate cut in September have also weakened, given entrenched inflationary pressures. To reprice those odds, investors are awaiting ECB President Christine Lagardes speech on Saturday at the annual Jackson Hole symposium.

Price Overview

Euro exchange rate today: The euro fell 0.2% to $1.1583, its lowest since August 6, from an opening level of $1.1606, after touching a high of $1.1617.

On Thursday, the euro closed down 0.4% against the dollar, its third loss in the past four sessions, following strong US economic data.

Weekly Performance

For the week to date, the euro is down more than 1% against the US dollar, on track for its first weekly loss in three weeks.

US Dollar

The dollar index rose 0.2% on Friday, extending gains for a second session to reach a two-week high at 98.83 points, reflecting continued strength of the US currency against a basket of majors and minors.

This strength has been fueled by renewed demand for the dollar as the best available investment in FX markets, particularly after robust US data in August confirmed that the worlds largest economy continues to grow at a stronger-than-expected pace despite headwinds from President Donald Trumps aggressive trade policies.

US Interest Rates

According to CME FedWatch: odds of a 25-bp Fed rate cut in September fell from 81% to 75%, while expectations of leaving rates unchanged rose from 19% to 25%.

Markets are now awaiting Fed Chair Jerome Powells speech later on Friday at the Jackson Hole symposium to reprice those expectations.

European Interest Rates

Recent inflation data in the euro area confirmed entrenched price pressures facing ECB policymakers.

According to Reuters sources, a clear majority at the ECBs latest meeting favored holding rates steady in September, for the second meeting in a row.

Money markets are currently pricing less than a 30% chance of a 25-bp cut in September.

Investors will be closely watching Lagardes speech at Jackson Hole on Saturday for additional signals.

Outlook for the Euro

At Economies.com, we expect that if Powells comments turn out more hawkish than markets currently anticipate, the odds of a September rate cut will recede further, which could drive the euro to extend losses against the US dollar.