Published: 21/08/2025 By ECAP
MARKET PESSIMISM
The British Pound rose briefly after UK inflation exceeded expectations at 3.8% in July, prompting markets to scale back 2025 rate cut bets. However, gains were short-lived as underlying data showed inflation being driven by volatile factors. Stagflation risks, fiscal concerns and speculation of 2026 rate cuts weighed on sentiment. Overall, although rate expectations shifted, confidence in the Pound remains fragile, with further direction dependent on upcoming UK economic data.
The Euro gained amid weakening confidence in external economies and signs of relative price stability within the Eurozone. With Eurozone CPI holding steady and PMI data expected to show a slowdown, the Euro remains supported by perceptions of monetary caution and stability. In contrast, rising global volatility and inflation surprises elsewhere have enhanced the Euro’s appeal as a steady alternative.
The U.S. Dollar faces mounting headwinds amid expectations of Federal Reserve rate cuts, high fiscal deficits and weakening relative yields. Traders await Chair Powell’s Jackson Hole speech for policy clues, though he’s expected to remain balanced. The dollar saw muted movement despite some safe-haven support, as focus shifts to U.S. PMIs and jobless claims, where weaker data could further undermine USD appeal.
Data supplied by GC Partners