August 18, 2025

“It is incredibly busy this week, and the main events are today’s discussions about Ukraine in Washington, UK CPI inflation on Wednesday, the US, UK, and eurozone PMIs on Thursday, and the Jackson Hole conference later in the week.”

Sam Cornford – Head of Trading

USD

The dollar remains under pressure as markets appear to be somewhat optimistic about Ukraine. Since Friday, the dollar has softened, crude oil prices have dropped, and European currencies and equities have held on. There was no immediate deal reached between Trump and Putin, and now Zelenskyy and his European allies are all on their way to Washington today for a follow-up meeting with the US president. The bad news is that Putin insists that Ukraine give up the entirety of the Donetsk and Luhansk regions – something forbidden in its constitution – but the good news is that the Russian president appeared to be open to a NATO-like US security guarantee for Ukraine. Peace will be good for European FX and bad for the dollar, though markets will want to know that Trump is firmly on Ukraine’s side and will not force it to accept an unpalatable deal. This week, we also get some Fed meeting minutes on Wednesday, the August PMIs on Thursday, and the Jackson Hole conference kicks off on Thursday.

GBP

The main event for sterling this week is Wednesday’s CPI inflation print, which the consensus expects to move higher once again, to 3.7%. That would support the Bank of England’s hawkishness at the August meeting and underpins the fact that the market is not fully pricing another rate cut until March 2026. This scenario will support the pound for as long as the labour market holds together, particularly if the Fed starts slashing rates next month.

EUR

A potential peace deal for Ukraine appears to be giving the euro some support. There are many reasons why the negotiations might fail to produce an acceptable deal for markets, chief among which is that Putin’s demands for land concessions are disallowed by Ukraine’s constitution, but for now the market remains relatively optimistic. This week’s diary includes some trade balance data this morning, the August PMIs on Thursday, and a speech from ECB President Lagarde on Wednesday in Geneva.

Markets

After a solid few days of gains, European stocks have turned slightly negative this morning. The mood has softened in the US, too, where equities have taken some minor losses in the past couple of sessions.

Main Economic Events (All Times CET)

11:00am: EU Trade Balance

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