Investing.com – The U.S. dollar fell early in the European session on Friday, as a rebound from a seven-month low weakened ahead of Federal Reserve Chairman Jerome Powell’s highly anticipated speech at a symposium in Jackson Hole.

At 04:30 ET (09:30 GMT), the dollar index, which tracks the U.S. currency against a basket of six other currencies, was down 0.1% at 101.245, just off its lowest level since Jan. 2.

Dollar weakens ahead of Powell’s speech

The dollar rebounded slightly earlier in the week, but is down about 1% this week, heading toward its fifth straight week of losses.

The weakness was driven by concerns about a weakening economy and expectations that the Federal Reserve was close to cutting interest rates.

The focus now turns to Powell’s speech on Friday, where he is expected to provide further guidance on interest rates and the economy.

“He will likely use the speech to prepare markets for a rate cut in September, which is fully priced in and largely anticipated based on the minutes of the Fed’s July meeting and recent Fed remarks,” analysts at ING said in a note.

“The question is whether it will go so far as to open the door to a 50bp move – if not in September, then later this year.”

The CME FedWatch tool showed that markets are now pricing in a nearly three-quarters chance that the Federal Reserve will cut rates by 25 basis points at its September meeting, with a 50 basis point cut becoming increasingly unlikely.

Euro and pound gain on feeble dollar

In Europe, the rate rose 0.1% to 1.1123, just off a 13-month high hit on Wednesday.

Eurozone consumers’ inflation expectations over the next 12 months remained stable for the third month in a row in July, a European Central Bank survey published on Friday showed.

The results of this survey can be used by ECB decision-makers as evidence that the public believes in the ECB’s ability to lower inflation to the targeted 2% level while lowering interest rates.

The European Central Bank has the room to cut interest rates, possibly twice more this year, as inflation remains on the broadly downward path predicted by policymakers, said Martins Kazaks, a member of the European Central Bank’s executive board.

“We are generally at the baseline of our forecasts, which is consistent with a gradual decline in interest rates,” Kazaks, the governor of Latvia’s central bank, said on the sidelines of the US Federal Reserve’s economic symposium in Jackson Hole.

rose 0.3% to 1.3129, just below a 13-month high reached on Thursday after the release of robust activity data for August.

Markets are currently pricing in the Fed cutting more interest rates than the European Central Bank or the Bank of England by the end of the year.

Yen gains, Ueda signals interest rate hike

In Asia, the yen fell 0.2% to 145.99 as demand rose after the Bank of Japan’s Ueda said short-term interest rates were still too low and needed to be raised to reach neutral levels.

He also reiterated the bank’s recent message that interest rates will rise further if inflation remains stable.

Ueda’s comments boosted the yen, which had been strengthening since the central bank raised interest rates by 15 basis points in behind schedule July.

fell 0.1% to 7.1372, rose 0.4% to 0.6732 and rose 0.4% to 0.6159.