The dollar and the euro traded cautiously today as investors refrained from taking risky bets a day ahead of a key speech by US Federal Reserve Chairman Jerome Powell.
Amid growing speculation Powell could unveil a softer policy stance towards inflation at the annual Jackson Hole retreat tomorrow, investors are bracing for the Fed's possible new steps to prop up the US economy.
Analysts said that targeting average inflation over time rather than setting a fixed 2% goal would likely mean lower rates for longer.
If the Fed confirms such a move, the greenback would stand little chance of a meaningful rebound anytime soon", they added, calling the mood in currency markets "somewhat subdued" due to the uncertainty.
Both a policy change announcement or the lack of are expected to resonate strongly across trading floors.
The dollar index, which tracks the greenback's value against a basket of currencies was up 0.1% at 93.11 after taking a hit yesterday following data showing US consumer confidence tumbling to the lowest in more than six years.
Against the euro, the dollar stood at $1.1818 following a 0.4% decline in the previous session.
The British pound bought $1.3135 having risen 0.7% against the dollar yesterday.
Sterling has managed to shrug off a lack of progress in trade negotiations between Britain and the European Union.
