LONDON (Reuters) – The euro struggled to make headway against a resilient dollar on Wednesday while foreign exchange markets remained largely calm ahead of a crucial meeting of central bankers later this week.

After markets rushed over the last two months to price in significant easing from central banks in the United States and Europe, the outlook for euro/dollar will depend largely on whether or not policymakers live up to those expectations.

Officials from major central banks will gather at Jackson Hole, Wyoming, on Friday with markets focused on a scheduled speech by U.S. Federal Reserve Chair Jerome Powell.

The speech comes after last week’s inversion of the U.S. yield curve – widely regarded as a recession signal – boosted expectations the Fed would cut interest rates again at its September policy meeting.

“In the big scheme of things, markets are relatively range-bound, with the focus on Jackson Hole later this week,” said Manuel Oliveri, a strategist at Credit Agricole.

The euro weakened marginally to $1.1097 EUR=EBS. The single currency has moved little since Italy’s Prime Minister Giuseppe Conte resigned on Tuesday, as some investors believed the move made a snap general election less likely.

The dollar, measured against a basket of currencies, edged higher to 98.228 .DXY.

Oliveri expects the euro to strengthen towards $1.12 by September, even though the European Central Bank will struggle to exceed investor expectations for cutting rates.

Talk of more fiscal spending in Germany, and the hit to the U.S. yield advantage from falling interest rates, should support the euro, he added.

“Fiscal stimulus is a positive for the currency,” he said.

The dollar has also been supported by talk of more spending – U.S. President Donald Trump said on Tuesday his administration was considering potential tax cuts on wages as well as profits from asset sales.

Elsewhere, sterling was the big focus as British Prime Minister Boris Johnson heads to Berlin to meet Chancellor Angela Merkel for talks over Brexit.

The pound briefly jumped on Tuesday after Merkel raised the possibility of practical solutions to the so-called backstop – an insurance policy for the Irish border after Brexit – which London opposes, but also reiterated that the EU would not reopen the Withdrawal Agreement on Britain’s exit from the EU.

Analysts say the pound is vulnerable should any positive noises emerge from Johnson’s meeting with Merkel after investors this month ramped up their bets against the currency.

Sterling was last down 0.4% at $1.2126 GBP=D3 and 0.4% lower versus the euro at 91.52 pence EURGBP=D3.

The dollar rose against the yen, rising 0.2% to 106.48 JPY=EBS and further away from the 7-month high of 105.05 the Japanese currency hit last week.

MUFG analysts said the dollar was rising against the yen after Trump said he wanted to introduce new tax cuts and on reports that negotiations to agree a U.S.-Japan trade deal were making progress.

“While trade talks are ongoing, it will be more difficult for Japan to express concern over a stronger yen given President Trump’s concerns over currency manipulation,” the analysts wrote.

The Swedish crown, which has fallen in August as investors concerned by the prospect of a global economic downturn bought into safe havens, rose 0.4% against the euro to 10.709 crowns per euro EURSEK=D3. It climbed versus the dollar SEK=D3, while the Norwegian crown was also stronger. EURNOK=D3 NOK=D3

(Graphic: Euro vs U.S. dollar link: tmsnrt.rs/2Nn685C)

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