20 October 2025

UK & US – Inflation data in focus as the week begins quietly

The week opens with a light data calendar, but inflation figures from the UK and US will dominate attention. Weekend headlines suggest markets remain largely indifferent to the US government shutdown, with greater concern centred on financial stability risks following renewed pressure on US regional banks.

In the UK, policymakers remain open to further monetary easing but require confirmation that headline, and core inflation are trending lower. Weekend commentary also revived speculation about tax increases in the upcoming Budget (26 November), with little mention of spending restraint. Markets may not respond favourably to tax hikes without corresponding fiscal discipline, potentially weighing on sterling.

UK CPI data due Wednesday is expected to show a modest rise across key inflation measures, driven by persistent pressures from food, energy, and utility costs. In the US, September CPI figures (Friday) are also expected to tick higher, though this is unlikely to derail expectations for a near-term Fed rate cut.

PMIs to offer insight into recent activity trends

Preliminary October PMIs from the euro area, UK, and US due at the end of the week, will provide a snapshot of recent economic momentum. The UK posted the weakest composite reading in September, largely due to a sharp drop in manufacturing activity. A rebound in October could offer temporary support for GBP, though the broader data calendar may complicate the picture.

This week’s UK releases include:

•    Tuesday – September public finances

•    Wednesday – CPI inflation

•    Thursday – October CBI industrial trends

•    Friday – October GfK consumer confidence and September retail sales

Conflicting signals across these releases could create volatility for sterling, particularly if consensus expectations diverge.

Markets remain range-bound ahead of central bank meetings

FX markets appear to be in a holding pattern ahead of upcoming central bank meetings. However, expectations for major policy shifts remain low. Unless there are surprises in voting outcomes or guidance, particularly from the Bank of England’s MPC, currency moves may remain muted.

Political developments, particularly those involving President Trump and his international engagements, could prove more influential than monetary policy in shaping FX sentiment. Interest rate differentials no longer appear to be the dominant driver of currency moves.

CAD – USD/CAD holds above C$1.40 as BoC weighs rate cuts

USDCAD continues to trade above C$1.40, despite broader USD weakness. The Canadian dollar’s underperformance reflects concerns over trade tariffs and soft growth, as highlighted by Bank of Canada Governor Tiff Macklem in recent remarks.

While Macklem described the labour market as soft, September employment data showed a gain of over 100,000 full-time jobs, suggesting a possible shift in momentum. With inflation anchored near target, the BoC retains room to ease policy further. Markets are not fully priced for additional cuts, which could drive further USDCAD volatility ahead of next week’s meeting.

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.