US Inflation Data in Focus After BoE Rate Cut.
Foreign exchange markets are starting the week in a quieter summer trading environment, digesting last week’s interest rate cut from the Bank of England. The BoE’s decision to lower rates, as had been increasingly expected, has shifted the policy landscape for the Pound Sterling. With last week's central bank activity now in the rearview mirror, the market's attention returns firmly to the United States and a series of top-tier data releases that will be critical for the Federal Reserve’s outlook.
The Pound Sterling is finding its footing after the Bank of England delivered a "dovish cut" last week, lowering its main interest rate while signalling a slow and data-dependent path for future moves. This week's UK labour market report, with a particular focus on wage growth, will be the next key test for the Pound, offering fresh clues on domestic inflationary pressures and the potential for further BoE action.
The US Dollar consolidated last week after the heavy losses that followed the previous Friday's weak employment report. The currency's direction this week will be determined by two crucial data points: the latest Consumer Price Index (CPI) inflation report on Wednesday, followed by the retail sales data on Friday. These releases will be instrumental in shaping market expectations for the Federal Reserve's anticipated rate cut in September.
The Euro continues to trade largely on the basis of broader market drivers, particularly the direction of the US Dollar. With the European Central Bank on a gradual easing path, the theme of policy divergence remains a key factor. The regional economic calendar is light this week, meaning the Euro will likely be most influenced by the outcome of the major US data releases and any resulting shifts in global risk sentiment.
Events to Watch This Week:
⦁ Tuesday, August 12: UK Labour Market Report
⦁ Wednesday, August 13: US CPI Inflation Report
⦁ Thursday, August 14: US Producer Price Index (PPI)
⦁ Friday, August 15: US Retail Sales
While trading volumes can be thinner in mid-August, this week contains highly significant event risk, particularly from the US. The inflation and retail sales data have the potential to cause substantial volatility by either solidifying or challenging the market's current expectation for a September rate cut from the Federal Reserve.
London Office: +44 (0) 203 918 5620
Dubai Office: +971 54 287 0072
