This week’s currency outlook is packed with pivotal inflation, policy, and activity reads from the UK, Eurozone, US, and Asia-Pacific. Expect heightened volatility as global markets assess economic conditions and central bank direction—particularly around major pairs like GBP, EUR, and USD.
Key Data Releases This Week
- Monday 18th August – Eurozone Trade Balance, US NAHB Housing Market Index
- Tuesday 19th August – UK Unemployment & Wage Growth, Eurozone Final CPI, US Building Permits & Housing Starts
- Wednesday 20th August – UK CPI (inflation), Eurozone Current Account, US FOMC Minutes
- Thursday 21st August – Eurozone Consumer Confidence, US Weekly Jobless Claims, US Existing Home Sales, UK GfK Consumer Confidence (late)
- Friday 22nd August – UK Retail Sales, German PPI, Eurozone Services Confidence, US Flash PMIs
EUR Outlook
The euro enters the week on uncertain footing. Inflation remains at the centre of attention with the final July CPI figures due on Tuesday. Recent ECB commentary has acknowledged progress in reducing headline inflation, but also stressed that underlying price pressures, particularly in services, remain sticky. This makes Tuesday’s print an important checkpoint.
Should inflation surprise to the upside, markets may begin questioning whether the ECB will delay its easing cycle until later in the year. Conversely, confirmation of softening price dynamics would reinforce the case for a September cut, particularly if coupled with weak consumer confidence on Thursday.
Later in the week, German PPI and eurozone services confidence will provide further insight into whether Europe’s manufacturing weakness is spreading more broadly across the bloc. For the euro, the risk is that data continues to paint a picture of subdued growth, which could leave the single currency vulnerable if the ECB signals a need to support activity.
GBP Outlook
Sterling traders are facing one of the busiest domestic weeks in recent months, with employment, inflation, and retail sales all on the agenda.
Tuesday’s jobs data will be closely watched for signs that the labour market is cooling. Wage growth has been one of the key factors preventing the Bank of England from cutting rates sooner, as strong pay increases risk feeding inflation. A softening in earnings would likely add momentum to calls for an autumn cut.
The most significant release comes on Wednesday with CPI. Inflation has edged lower over recent months, but progress remains uneven. A higher-than-expected figure could temporarily lift GBP as traders reassess the BoE’s timeline, while a weaker print would bolster the case for policymakers to act sooner.
Finally, Friday’s retail sales will test the resilience of UK consumers. With financial conditions still relatively tight, any sign of faltering spending could signal that higher interest rates are weighing more heavily on households. For GBP, the balance of risk lies in whether this week’s data set points toward a “soft landing” or a more pronounced slowdown.
USD Outlook
The dollar is likely to be steered by both economic releases and central bank commentary this week.
Housing market indicators, including building permits and housing starts on Tuesday, remain important as they provide a pulse check on consumer and construction sector sentiment. These will be followed by the FOMC minutes on Wednesday, which could prove decisive. Traders will scrutinise the text for evidence of whether policymakers are united or divided on the timing of the next rate cut.
If the minutes show confidence in the strength of the US economy, markets may push back expectations for cuts, offering support to the dollar. However, if language highlights concerns about slowing growth or disinflationary trends, September easing speculation could return.
The week closes with flash PMIs on Friday, which should capture the momentum in both manufacturing and services. These indicators will be especially valuable in gauging how businesses are adapting to tighter credit conditions and evolving consumer demand. Overall, the dollar remains finely balanced between a narrative of resilience and one of gradual cooling.
Fact of the Week
💡 Did you know? The UK services sector accounts for almost 80% of GDP. This means that even small shifts in consumer spending or service-sector confidence can have an outsized effect on both the economy and the pound.
Global Insights
- China: Policymakers continue to face pressure to revive growth amid ongoing weakness in property and manufacturing. Any announcement of broader stimulus measures could lift risk appetite and commodity-linked currencies.
- Japan: Speculation persists that the Bank of Japan could intervene to stem yen weakness. Markets remain highly sensitive to signals from Tokyo, particularly if USD/JPY drifts toward levels seen as unsustainable.
- Emerging Markets: Commodity-sensitive currencies such as the AUD, CAD, and ZAR remain influenced by both China’s trajectory and dollar dynamics. Shifts in global demand expectations can ripple quickly through these markets.
- Geopolitics: Attention remains on energy markets, with oil prices volatile amid Middle East tensions and supply concerns. Higher energy costs could complicate the disinflation story in both Europe and the UK.
Summary
This week offers a packed calendar across the UK, eurozone, and US, with data releases capable of shifting market expectations for all three major central banks. With the currency outlook hinging on whether inflation, labour, and activity data point toward easing pressures or lingering risks, traders should prepare for volatility across GBP, EUR, and USD.
