Inflation Data in Focus After Jackson Hole Symposium.

A cautiously dovish tone from the Federal Reserve at last week's Jackson Hole meeting has set the stage for a critical week of inflation data from both the US and Europe. Chair Powell’s commentary reinforced the view that a September interest rate cut is possible but not guaranteed, placing immense focus on this week’s final economic reports before the Fed's next decision. The week begins slowly, however, with a public holiday in the UK.

The Pound Sterling market is closed for the Summer Bank Holiday today. The currency is trading on the back of last week's business activity surveys which pointed to sluggish growth. With a light domestic calendar for the remainder of the week, the Pound's direction will be primarily driven by the major international data releases and any resulting shifts in the US Dollar.

The US Dollar is trading with a softer tone following Chair Powell's nuanced speech. The key event for the Dollar this week will be Friday's release of the Core PCE Price Index, the Federal Reserve’s preferred measure of inflation. This report will be a crucial final input before the Fed's September meeting and has the potential to either solidify or challenge the market’s expectation of an imminent rate cut.

The Euro is beginning the week on a steady footing, with investors also looking ahead to a vital inflation print. The preliminary pan-Eurozone inflation figures for August, due on Friday, will be a critical data point for the European Central Bank. A significant deviation from expectations could alter the outlook for the ECB's gradual policy easing path, especially when viewed alongside the US inflation data released on the same day.

Events to Watch This Week:

⦁ Monday, August 25: German Ifo Business Climate & UK Summer Bank Holiday

⦁ Tuesday, August 26: US Consumer Confidence

⦁ Thursday, August 28: US GDP Growth Rate

⦁ Friday, August 29: Eurozone Preliminary CPI & US Core PCE Price Index

While the week begins quietly, it culminates in a highly significant Friday with the release of key inflation reports from both the US and the Eurozone. The data will provide a critical test for the market's current central bank expectations and is likely to generate significant volatility heading into the weekend.

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