August 19, 2025

“The markets remain cautious after a big meeting between European leaders and the US president yesterday that set the stage for direct negotiations between Putin and Zelenskyy. The focus now shifts to key inflation data in Canada and the UK, followed by the Jackson Hole conference later in the week.”

Tim Hallinan – Trading Director

USD

The dollar gained throughout the day yesterday as markets digested an historic summit between Trump, Zelenskyy, and a group of European leaders. There were two main headlines: a) Trump promised to ‘co-ordinate’ on a security guarantee for Ukraine once peace has been secured, and b) there are now plans for Putin and Zelenskyy to meet within the next few weeks, possibly in Hungary. While it is all good news, it perhaps still feels like early days, and that these are the easy steps in a process that might ultimately involve Ukraine giving up its territory. Natural gas and oil prices rose and a touch of caution was found its way into markets, leaving EURUSD 0.4% lower. It is a relatively light day data-wise beyond some housing starts data, and the next major events for the dollar now are tomorrow’s Fed minutes and the Jackson Hole symposium, which kicks off on Thursday.

CAD

Canadian inflation is expected to have fallen further in July, as markets debate on whether the Bank of Canada might deliver one more cut. Recent weakness in the labour market surveys have upped the probability on a further cut this year to nearly 80%. However, while the consensus is for headline inflation to fall from 1.9% to 1.8%, the core median and trim measures are both expected at 3.1% – that might make policymakers uncomfortable with the idea.

GBP

Sterling has broadly followed the dollar over the past few days as the market’s attention has been trained on Ukraine talks in Anchorage and Washington. This saw it tick higher on Friday before slipping around 0.3% yesterday. Tomorrow morning brings some critical UK data in the form of the July CPI inflation report. The consensus is looking for both the headline and core measures to print at 3.7%, as inflation remains significantly more persistent in the UK compared to its peers. The market is not fully pricing in a rate cut until April now, and it is leaning towards rate holds for the next three meetings.

EUR

The euro gave up its gains from Friday yesterday as investors pared back their initial optimism about the war in Ukraine. A successful bilateral meeting between Zelenskyy and Putin and some indications that a peace deal may genuinely be in reach could begin to lift the euro in the coming weeks – the Ukraine war has been a significant driver of euro weakness in recent years, especially later in 2022.

Markets

The picture is mixed at the European open this morning, with France in the green and Germany and the UK in the red. US equities stabilised yesterday after some minor losses toward the end of last week, though futures are pointing down this morning.

Main Economic Events (All Times CET)

2:30pm: Canada CPI Inflation

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