18 August 2025

GBP

Sterling enters a data-heavy week with inflation firmly in focus. Wednesday’s UK CPI release is forecast at 3.7%, up from 3.6% in June. Inflation has been edging higher since April, and a higher-than-expected reading could add weight to any expectations that the Bank of England could hold rates at 4.00% for longer.

Thursday’s Service and Manufacturing PMI data, which are both expected to have increased marginally since last month, will help assess the broader economic backdrop, while Governor Andrew Bailey’s appearance at Jackson Hole may offer clues on the BoE’s forward guidance. With the UK economy showing signs of fragility, the BoE remains in a delicate balancing act between inflation control and growth support.

EUR

The euro continues to navigate a cautious recovery, supported by signs of stabilisation in the eurozone economy. July’s Manufacturing PMI rose to 49.8, still below the 50.0 expansion threshold, but the slowest pace of contraction since July 2022. This week’s Services PMI and composite data, due Thursday, will provide a broader view of economic momentum.

European Central Bank President Christine Lagarde’s speech at Jackson Hole this weekend could also influence rate expectations. Markets currently expect the ECB to hold rates at 1.75% until December, with one final cut likely before the end of the year.

USD

The dollar remains highly sensitive to interest rate expectations, and this week’s calendar is packed with potential catalysts. Wednesday’s FOMC meeting minutes and Friday’s speech from Fed Chair Powell will be pivotal in shaping market sentiment.

The Fed has held rates steady at 4.25–4.50% since January, following 75bps of cuts in late 2024. But with political pressure mounting ahead of the 2026 Fed Chair transition, markets are now pricing in a 25bps cut in September and up to 100bps of easing over the next year.

Thursday’s PMI data will offer a timely snapshot of business sentiment and economic resilience. If the data holds up and Fed commentary leans hawkish, the dollar could find support. Conversely, dovish signals may weigh on the greenback.

NZD

The Reserve Bank of New Zealand meets Wednesday morning, with a 0.25% rate cut to 3.00% widely expected. The RBNZ has already cut rates by 225bps since August 2024, bringing the Official Cash Rate to its lowest level since mid-2022. Inflation is now comfortably within the 1–3% target range, but economic growth remains weak, with Q1 2025 seeing a 0.7% year-on-year contraction.

The central bank has signalled a data-dependent approach, suggesting the easing cycle may be nearing its end. Unless the RBNZ surprises with a dovish tone or forward guidance, the NZD is unlikely to move significantly.

Author 

Views expressed in this commentary are those of the author, and may differ from your appointed Moneycorp representative. This commentary does not constitute financial advice. All rates are sourced from Bloomberg and forecasts are taken from Forex Factory.