August 12, 2025

“US CPI inflation today will be key for the Federal Reserve, which most expect to cut now in September after the weak July jobs report. The pound is an outperformer today, meanwhile, after some better-than-expected news on the labour market.”

Sam Cornford – Head of Trading

USD

The dollar bounced yesterday as Trump confirmed another 90-day extension to the US-China tariff truce. In other news, he announced in a Truth Social post that gold would not be subject to tariffs, and he declared a crime emergency and took over the police force in Washington DC, where violent crime is at its lowest in 30 years according to Justice Department statistics. Today is all about CPI inflation this afternoon, which will be significant for Fed pricing. The consensus is looking for small upticks in both the headline (2.8%) and core (3.0%) year-on-year measures, and the monthly core figure is expected at 0.3%. The market is still pricing an 85% probability of a rate cut in September, though that may change if tariff-related goods rise in price more than expected. A downside surprise, meanwhile, might boost bets on a third rate cut in 2025 and weaken the dollar.

GBP

Sterling is performing well this morning, after a could-have-been-worse labour market report. Payrolls fell only by 8K, which is the best in six months, and the June figure was revised from -41K to -26K. Unemployment stayed steady and wage growth held at 5%, broadly supporting the Bank of England’s hawkish stance on the pace of further rate cuts. The data is not great by any means, and it still points to a stagflationary scenario, but the slowing rate of job losses will ease concerns of a runaway labour market weakening. Next up for the UK is GDP on Thursday.

EUR

The euro slipped yesterday as the broad dollar rebounded. The main event today are the ZEW investor sentiment surveys for Germany and the eurozone, where both the current situation and the expectations indexes are expected to fall considerably off the back of the overall disappointing US-EU trade deal earlier in the month.

Markets

Stocks jumped in Europe yesterday on the news of an extension to the US-China truce, while the S&P 500 edged slightly lower ahead of the key US data today.

Main Economic Events (All Times CET)

8:00am: UK Wage Growth & Payrolls
11:00am: Eurozone ZEW Sentiment
2:30pm: US CPI Inflation

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