Pound Sterling (GBP)
Sterling is enjoying short-term gains, underpinned by stronger-than-expected inflation and services data. That said, its broader outlook remains mixed, weighed down by persistently high inflation, sluggish economic growth, and mounting fiscal concerns. With the UK facing tax rises and subdued demand, analysts have cautioned over the risk of stagflation.
Euro (EUR)
The Euro started the week on firmer ground, lifted by geopolitical optimism and a rebound in manufacturing figures. However, momentum quickly faded as hopes for peace between Russia and Ukraine diminished. A sharper-than-expected contraction in German GDP added further pressure, underscoring concerns about Eurozone growth prospects. Looking ahead, data on German retail sales, employment, and inflation will be pivotal. Weak readings could place the Euro under further strain, leaving it vulnerable as the week draws to a close.
U.S. Dollar (USD)
The US Dollar has come under pressure following Fed Chair Jerome Powell’s dovish remarks at Jackson Hole and President Trump’s dismissal of Fed Governor Lisa Cook. Markets are increasingly uneasy about potential political interference in the Federal Reserve, raising doubts over its independence. Bearish positioning, alongside expectations of rate cuts in September, has further undermined the Dollar, with analysts warning of additional downside amid heightened stagflation concerns and risks to institutional credibility.