The euro edged up from 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 added as much as 0.21% to $1.0752, continuing its grind higher from last week's low of $1.0686, its weakest since mid June.
It was last a touch higher at $1.0736, as major moves were capped by the looming ECB meeting.
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 muted elsewhere too, with sterling barely changed at $1.2486, the yen a touch firmer at 147.29 per dollar, and the Swiss franc flat at 0.8934 per dollar.
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%.
The U.S. consumer price index (CPI) increased by 0.6% last month, the largest gain since June 2022, the Labor Department said on Wednesday. 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.
The Australian dollar rose as much as 0.54% to its highest since Sept. 5 at $0.64545 after figures showed the economy added a consensus-beating 64,900 jobs in August.
It failed to hold onto all those gains however, and was last up 0.2% at $0.6433.
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.
