August 22, 2025

“All eyes are on Jackson Hole this morning, where the Fed chair typically lays out his vision for upcoming monetary policy in the US. Central bank heads from the UK and eurozone also speak tomorrow.”

Tim Hallinan – Trading Director

USD

The dollar is edging higher heading into Powell’s Jackson Hole speech today, with markets continuing to pare back their rate cut expectations yesterday after some solid US PMI data. The implied probability of a 25bps cut in September has slipped down from >100% to around 70% over the last couple of weeks, as the other data has broadly not corroborated the scary economic picture that was painted by the July payrolls report. The Fed’s Hammack yesterday also argued that she would not see the case for a September cut given the current data. Today is all about Fed chair Powell’s keynote address at the Jackson Hole symposium, and the market will want to see how keen he is to get going next month. There is a chance that he is much more cautious than expected, in which case look out for some dollar strength and an angry Truth Social post from the US president.

GBP

Yesterday’s composite PMI index for August was the UK’s best in 12 months, but that has done sterling few favours as the overall growth outlook remains weak and investors focus on Jackson Hole. The figure rose from 51.5 to 53.0 this month, thanks to a surge in services activity that offset a further slump in the manufacturing sector. Retail sales data was due to come out this morning, but we will need to wait an extra two weeks after the ONS admitted to fresh data quality issues. BoE Governor Bailey speaks tomorrow in Wyoming, and his comments might shift sterling at next week’s market open.

EUR

EURUSD has slipped to a two-week low this morning on the back of some broad dollar strength. Powell’s Jackson Hole speech is the main event today across FX, and ECB President Lagarde speaks tomorrow. We also get some negotiated wage data from the ECB this morning, which printed at 2.5% in Q1 and would likely need to rebound significantly if markets were to start pricing in another rate cut before the end of the year.

Markets

Stocks remain soft this morning as we approach Powell’s key speech today, with European equities a touch lower and US futures pointing downward.

Main Economic Events (All Times CET)

11:00am: ECB Negotiated Wages
4:00pm: Fed Chair Powell speaks at Jackson Hole

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