Week ending 14 August 2026

Weekly Recap

GBP - UK growth surprises to the upside

Sterling was supported last week by stronger-than-expected UK economic data, with the latest GDP figures suggesting the economy is proving more resilient than markets had anticipated. This matters for the pound because stronger economic activity gives the Bank of England more room to keep interest rates higher if inflation remains elevated. The combination of resilient growth and expectations that UK rates may remain relatively high helped improve sentiment towards sterling.

USD -US inflation data shifts the focus back towards the Federal Reserve

The main driver for the dollar was the latest round of US inflation data, with CPI and producer-price figures released during the week. Markets remain highly sensitive to whether inflation is cooling sufficiently for the Federal Reserve to become less restrictive, so these releases were important in shaping expectations for the next move in US interest rates. Any evidence that price pressures are easing reduces the need for tighter monetary policy and can therefore weigh on the dollar, while persistent inflation has the opposite effect.

EUR - ECB expectations remain the dominant theme

For the euro, attention remained firmly on the outlook for European Central Bank policy. Inflation across the euro area has eased from earlier highs but remains an important consideration for policymakers, particularly alongside concerns about the strength of economic growth. This leaves the euro caught between the possibility of interest rates remaining higher to control inflation and concerns that tighter policy could place further pressure on the European economy.

Week Ahead: 17–21 August

GBP - UK labour-market data

The main event for sterling this week will be Tuesday morning's UK labour-market report. Markets will be watching wage growth and unemployment closely for signs that conditions are cooling. Strong wage growth or a resilient jobs market could encourage the Bank of England to maintain tighter monetary policy for longer, which would generally support sterling. A noticeable deterioration in employment or wages would instead strengthen the argument for easier policy and could put pressure on the pound. The release is scheduled for Tuesday at 7:00 AM UK time.

USD - Federal Reserve expectations

For the dollar, the key theme will remain the direction of Federal Reserve policy following last week's inflation releases. With relatively few major US economic releases this week, markets are likely to scrutinise incoming data and Fed communication for clues about how policymakers are interpreting inflation and the wider economy. Evidence that inflation remains a concern would favour a more hawkish Fed outlook and could support the dollar, while increasing concern about slowing growth would make tighter policy less likely and could weigh on the currency.

EUR - Eurozone inflation

The euro's biggest scheduled event comes on Wednesday with the latest eurozone inflation figures. Inflation remains central to the ECB's decision-making, so markets will be looking particularly closely at whether underlying price pressures remain persistent. Higher-than-expected inflation would strengthen the case for tighter ECB policy and could support the euro, while softer inflation would give policymakers more flexibility and could weigh on the currency. The release is scheduled for Wednesday 19 August.

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