August 20, 2025

“The dollar has made steady gains during a quiet calendar so far this week, and the focus is shifting now to tomorrow’s PMIs and the Jackson Hole speeches. Sterling has made some modest gains this morning after another hot inflation print.”

Sam Cornford – Head of Trading

USD

A cautious mood has dominated markets this week and the dollar continues to grind higher as stocks take a dive. There is no obvious trigger for the move, though the gloom might perhaps be related to the lack of progress on the substance of a Ukraine deal, the extreme equity market concentration driven by the tech sector, and Trump’s efforts to force a government stake in Intel. The main events today are a speech by Fed Gov Waller, who is the favourite to become the next chair, and the release of the Fed meeting minutes from the July decision. These probably won’t contain any major new information, given that the decision occurred before the July non-farm payrolls report that has dramatically shifted expectations for cuts. Powell’s speech in Wyoming on Friday has more potential to jolt the dollar here.

GBP

Today’s CPI data will once again have Bank of England policymakers banging their heads against a wall, with some beginning to wonder whether this month’s rate cut was a mistake. Inflation rose more than expected from 3.6% to 3.8%, fuelled by 5.0% services inflation, sending sterling higher against most of its peers this morning. It is not an ideal situation for the BoE, whose forecasts do not see inflation returning to target until mid-2027. That said, much of the increase was driven by airfares, which are notoriously volatile. Bets on the interest rate path are relatively unchanged, with the next cut expected in Q1 2026.

EUR

Broad dollar strength has dragged the euro down over the past couple of days, although EURUSD remains around the middle of its August range. ECB President Lagarde speaks today in Switzerland and we get the final eurozone CPI figure for July, which was first estimated at 2.0%. The market still isn’t quite sure that the ECB will cut again in this cycle, but it is leaning to just one more 25bps cut in the first half of next year. Elsewhere in Europe, the Swedish Riksbank held rates steady at 2.0% this morning and said that it still sees some probability of a further rate cut before the end of the year.

Markets

Stocks have taken a dive over the last 24 hours, beginning with a 1.4% drop in the tech-heavy Nasdaq and continuing this morning with a 0.5% drop in the broader European indexes.

Main Economic Events (All Times CET)

8:00am: UK CPI Inflation
9:30am: Riksbank Rate Decision
11:00am: Eurozone Final CPI Inflation
8:00pm: Federal Reserve Meeting Minutes

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