Trump to meet Putin, GBP under pressure & US inflation and US - China tariffs expire tomorrow!

GBP: 3 weeks ago, GBP slumped to its lowest level against the Euro since November 2023, - GBP/EUR at 1.1500 after starting the year nearer 1.2000. The cause was the heightened fears surrounding the UK’s debt and possible rate cuts.

After the 7th August rate CUT, GBP gained ground (!!)- how did that happen? It was because the vote to cut rates (usually weakening a currency) was very close (named by many as a ‘hawkish dissent’), and the market is now only pricing in a 75% chance of a 0.25% cut in 2025 - a far cry from the expectations of 2 or 3 more cuts expected before that meeting.

GBP/EUR at 1.1550
GBP/USD at 1.3450

Let’s keep our eyes on Tuesday’s employment data & Thursday’s GDP …. but with the UK debt and fiscal ‘situation’ refusing to go away, markets will struggle to back the pound.

USD: If you are looking at USD movement, Tuesday’s inflation data will be the short-term focus, but beyond this week’s data, the Jackson Hole event late next week is likely to become a bigger focus for markets - Recall that Fed Chair Powell indicated at last year’s Jackson Hole that the time had come to lower rates .. and they did. ALL eyes will be on this annual symposium.

The inflation data might show that Trump’s tariffs ARE increasing inflation in the US, but against the back-drop of the US Federal Reserve being under real political pressure to cut interest rates, the market will have a hard time finding direction!

EUR/USD at 1.1620 is in the middle of the 1 month range. True direction will come from Retail Sales at the end of the week or evidence of progress on the US-China tariff negotiations that are due to expire on TUESDAY!

EURO:  The shared currency continues to gain ground as the USD loses ground, taking EUR/USD up to 1.1650, but the EUR is likely to be capped around 1.1700

ZEW data out of Germany tomorrow will be closely watched, but hopes of a peace deal in Ukraine, ahead of Friday’s meeting between US President Donald Trump and his Russian counterpart Vladimir Putin, pose further support for the common currency, as European leaders put pressure to include Ukrainian President Volodymyr Zelensky in the talks.

If Thursday’s GDP throws up a positive or negative surprise, the market will react accordingly - worth noting.

Tuesday
US: Inflation data
AUS: Interest rate decision and statement
UK: Employment data

Wednesday:
Germany: Inflation data
US: Fed speeches

Thursday:
AUD: Employment data
EUR: GDP data
US: Producer Price inflation

Friday:
Trump - Putin meeting
USA: Confidence data & Retail Sales
China: Industrial Production & Retail Sales