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Eur usd weekly forecast to hike or not to hike kevin warsh between rock and hard place
Confirmed
In Short: US inflation data and strong job market reports have increased the likelihood of a Federal Reserve interest rate hike this month.
The odds for a 25 basis point interest rate hike by the Federal Reserve have risen significantly following the release of US Consumer Price Index (CPI) figures, according to the CME FedWatch Tool. The probability of a hike has climbed to around 90%, up from 72.4% the previous day. This increase is driven by the latest US Nonfarm Payrolls data, which showed a stronger-than-expected gain of 162,000 jobs in August, surpassing the forecast of 56,000.
Federal Reserve Chairman Kevin Warsh has been vocal about the labor market's consistency with full employment, taking a hawkish stance at the Jackson Hole economic symposium. His comments have reinforced the market's belief that the Fed will continue to prioritize inflation control. In response, the Pound Sterling (GBP) has retreated slightly against the US Dollar (USD), trading near 1.3512, as the latest US inflation report reaffirmed Warsh's view.
Meanwhile, the European Central Bank (ECB) has already delivered a 25 basis point interest rate hike, as expected. However, the BoC's stance remains uncertain, with recent job market data showing a significant loss of jobs in Canada. This has led to a reevaluation of the BoC's rate hike expectations, with markets now pricing in more hikes than previously anticipated.
The Federal Reserve's position is particularly challenging, as it faces a difficult decision between supporting a strong labor market and addressing persistently high inflation. According to reports, the Fed is in a "between rock and hard place" situation, with markets pricing in a 61% probability of a rate increase by September, up from 54% the previous day. This uncertainty has led to fluctuations in currency markets, with the US Dollar recovering ground after initially losing ground on Monday.
In the coming days, the Federal Reserve will need to carefully assess incoming economic data to determine the appropriate course of action. Markets are currently pricing in a rate hike this year, but there is still a high degree of uncertainty. Commerzbank FX analyst Michael Pfister noted that the Bank of England is uncertain about the transitory nature of current price shocks, adding to the complexity of the Fed's decision-making process.
What's confirmed
- The odds for a 25 basis point interest rate hike by the Federal Reserve have risen significantly following the release of US Consumer Price Index (CPI) figures, according to the CME FedWatch Tool. The probability of a hike has climbed to around 90%, up from 72.4% the previous day. This increase is driven by the latest US Nonfarm Payrolls data, which showed a stronger-than-expected gain of 162,000 jobs in August, surpassing the forecast of 56,000.
- Federal Reserve Chairman Kevin Warsh has been vocal about the labor market's consistency with full employment, taking a hawkish stance at the Jackson Hole economic symposium. His comments have reinforced the market's belief that the Fed will continue to prioritize inflation control. In response, the Pound Sterling (GBP) has retreated slightly against the US Dollar (USD), trading near 1.3512, as the latest US inflation report reaffirmed Warsh's view.
- Meanwhile, the European Central Bank (ECB) has already delivered a 25 basis point interest rate hike, as expected. However, the BoC's stance remains uncertain, with recent job market data showing a significant loss of jobs in Canada. This has led to a reevaluation of the BoC's rate hike expectations, with markets now pricing in more hikes than previously anticipated.
- The Federal Reserve's position is particularly challenging, as it faces a difficult decision between supporting a strong labor market and addressing persistently high inflation. According to reports, the Fed is in a "between rock and hard place" situation, with markets pricing in a 61% probability of a rate increase by September, up from 54% the previous day. This uncertainty has led to fluctuations in currency markets, with the US Dollar recovering ground after initially losing ground on Monday.
- In the coming days, the Federal Reserve will need to carefully assess incoming economic data to determine the appropriate course of action. Markets are currently pricing in a rate hike this year, but there is still a high degree of uncertainty. Commerzbank FX analyst Michael Pfister noted that the Bank of England is uncertain about the transitory nature of current price shocks, adding to the complexity of the Fed's decision-making process.
What's still developing
- On Friday, Cleveland Fed Beth Hammack noted that “policy is not restrictive and inflation is too high.” She added that “contact views indicate now is the time for the Fed to hike to control inflation.” Meanwhile, money markets now assign a 61% probability of a rate increase by the Fed in September, up from 54% yesterday, via Prime Terminal.
- The swap markets indicate that speculators expect the BoE to hike rates twice in six months.
- A round up of the latest American Dollar forecast news items from the Currency News desk.
- Compare best exchange rates » 11 Sep 2026 at 5 PM - Written by James Fuller STORY LINK Pound Sterling to Dollar Forecast: US CPI Keeps Fed on Hawkish Path 10 Sep 2026 at 8 PM - Written by David Woodsmith STORY LINK GBP/USD Price Forecast: Can Pound Sterling Hold $1.35 if UK Growth Stalls?
- The BoC's slack story survived Friday, but what didn't survive is the idea that the hikes the market is pricing have anything to do with the labour market.
- Then the curve did the strange thing: it priced in more hikes.
- In the same hour, US payrolls printed 162K against a forecast near 55K, and the two prints pulled the Loonie the same way.
- GBP/USD Forecasts: Close to 2-Week Lows The dollar lost ground on Monday, partly a function of month-end position adjustment, but it recovered ground on Tuesday and traded around 1.3530, close to 2-week lows and near the key 1.3500 level.