Published: 26/08/2025 By ECAP
FRAGILE OUTLOOK
The British Pound is seeing short-term strength, supported by stronger than expected inflation and services data. However, its outlook remains fragile due to high inflation, weak economic growth, and rising fiscal concerns. With the UK facing tax hikes and sluggish demand, analysts warn of stagflation risks. Comparisons to the 1976 currency crisis are resurfacing, and without clearer economic momentum, the Pound may struggle and potentially revisit 2024 lows.
The Euro showed early-week strength, supported by geopolitical optimism and a rebound in manufacturing data. However, gains faded as peace hopes between Russia and Ukraine dimmed. Moreover, a larger than expected contraction in Germany’s GDP added pressure, highlighting concerns about Eurozone growth. Looking forward, German retail, jobs, and inflation data will be key. Ultimately, weak results could further weigh on the Euro, keeping it vulnerable heading into the week’s end.
The U.S. Dollar is under pressure following Fed Chair Jerome Powell’s dovish tone at Jackson Hole and President Trump’s firing of Fed Governor Lisa Cook. In fact, markets are concerned about political interference in the Federal Reserve, raising doubts about its independence. Ultimately, bearish positioning and expectations of rate cuts in September have weakened the Dollar, with analysts warning of further downside amid growing stagflation fears and institutional credibility risks.
Data supplied by GC Partners