The euro rested near a three-month low against the dollar on Thursday as traders waited to see if the European Central Bank would raise rates, a day after U.S. inflation data failed to alter views for a Federal Reserve pause next week.
The euro EUR=EBS was last a whisker higher at $1.0736, steadying above, but not far from, last week's low of $1.0686, its weakest since mid June as major moves were capped by the looming ECB rate decision, due at 1215 GMT.
Expectations for the meeting are split between a pause and a 25 basis point rate increase, with market pricing leaning towards a hike, bolstered partly by a Reuters report that Europe's central bank expects inflation will stay above 3% next year in its updated forecasts, versus the 2% target.
"Given market pricing, (the euro) will fall more if the ECB keep interest rates on hold than rise if interest rates are increased," said Kristina Clifton, FX strategist and economist at Commonwealth Bank of Australia in a note.
The ECB will also publish an updated set of economic forecasts, and the ECB’s views on how quickly inflation will fall will guide the market as to how much further tightening is likely, Clifton added.
Moves were fairly muted across currency markets, with sterling down 0.15% to 1.2471 among the larger fallers. The yen was steady at 147.34 per dollar and the Swiss franc likewise at 0.8934 per dollar. GBP=D3 JPY=EBS CHF=EBS
Wednesday's U.S. CPI data did little to alter market expectations for the Federal Reserve, or the dollar.
Traders are almost certain the Fed will keep rates steady on Sept. 20, according to money market pricing. Odds for a quarter point increase by year-end though, stand at about 40%. FEDWATCH
The U.S. consumer price index (CPI) increased by 0.6% last month, the largest gain since June 2022, the Labor Department said. However, core inflation, which is of greater concern to the Fed as it strips out food and energy prices, ran at a 4.3% year-on-year rate in August from 4.7% the previous month.
Elsewhere, Sweden's crown briefly touched a new record low of 11.967 per euro after data showed the pace of headline Swedish inflation slowed more than expected in August.
The move was short-lived and the Swedish currency was last at 11.94 per euro and 11.12 per dollar, both little changed on the day. EURSEK=D3 SEK=D3
The Australian dollar AUD=D3 rose as much as 0.52% to its highest in a week $0.64545 after figures showed the economy added a consensus-beating 64,900 jobs in August.
China's offshore yuan weakened on Thursday after the People's Bank of China said it would cut banks' reserve requirement ratio by 25 basis points. CNH=D3
The dollar rose to as high as 7.2921 against the yuan traded offshore right after the announcement, up 0.3% on the day CNH=D3.
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