Central Banks in Focus: Countdown to the Fed.

• Fed focus: Markets expect a 25bp cut Wednesday, with two more by year-end; a surprise 50bp cut could weigh further on USD.

• US data ahead: Retail sales, jobless claims, and TIC flows in focus for signs of labour market weakness and foreign investor sentiment.

• Eurozone: Fitch downgrade of France was anticipated; attention shifts to new PM Lecornu’s fiscal plans and ECB speakers, especially Schnabel.

• GBP outlook: Labour data, CPI, and BoE meeting make it a key week; hawkish stance likely to hold unless wage or inflation surprises lower.

• Market ranges: USD (DXY) seen 97.20–98.00 into FOMC; EUR/USD steady 1.1700–1.1750; EUR/GBP firm at 0.86–0.87; GBP/USD eyeing 1.36 on dovish Fed.

USD: Markets eye Wednesday’s FOMC decision
A public holiday in Japan has kept FX markets subdued at the start of the week. Overnight, Chinese activity data came in weaker, strengthening the case for more stimulus, while Korean markets rallied after the government scrapped a plan to lower the capital gains tax threshold—pushing USD/KRW back below 1400.

This is a heavyweight week for central banks: five G10 meetings are scheduled, with three expected to cut rates. The main event is Wednesday’s FOMC meeting, where the consensus—and our view—expects a 25bp cut, followed by two more before year-end. Markets are pricing in 68bp of the 75bp anticipated cuts for 2025. The dollar is likely to remain slightly offered into the meeting, with potential for a further slip if a larger 50bp cut proves a closer call than expected.

Beyond the Fed, the US calendar brings August retail sales (Tuesday), weekly jobless claims, and July TIC flows (Thursday). Last week’s rise in claims briefly hit the dollar, and TIC data will be watched for signs of foreign investors shifting from hedging to outright selling of US assets. Seasonal flows still lend the dollar some support, but this week’s FOMC is set to define Q4’s direction. Expect DXY to stay in a 97.20–98.00 range until Wednesday evening.

EUR: French downgrade barely moves the needle
Fitch’s one-notch downgrade of France to A+ came as little surprise, with bond spreads already priced for weaker ratings. The euro and French debt were largely unmoved. Domestically, the focus now falls on how quickly new Prime Minister Sébastien Lecornu can unite a divided National Assembly behind fiscal tightening. Early on, he has dropped plans to scrap two public holidays, but markets will continue to monitor fiscal developments closely—even if a broader eurozone crisis looks unlikely.

This week brings limited eurozone data, but a dense schedule of ECB speakers. Today’s highlight is Isabel Schnabel’s speech at 1:30pm CET. Recently hawkish, she has argued that the ECB’s 2.00% deposit rate remains “mildly accommodative,” warning that rates may rise sooner than expected. That stance adds mild upside risk for EUR/USD and short-end euro swaps. For now, expect EUR/USD to hold its 1.1700–1.1750 range until the Fed provides the next catalyst.

GBP: Sterling gears up for data-heavy week
The pound faces a packed agenda. Tuesday brings labour and wage figures, Wednesday sees August CPI, and Thursday delivers the Bank of England’s MPC decision. Unless employment or wage pressures ease meaningfully, the BoE is expected to stick to the hawkish messaging it adopted in August. Markets currently price just 8bp of cuts this year and about 40bp by mid-2026.

The UK’s inflation profile stands out against both the eurozone and the US, with price data now the key driver of BoE policy timing. Despite ongoing political turbulence under the Labour government, sterling remains well supported thanks to its yield appeal. EUR/GBP looks steady in its 0.86–0.87 band, while GBP/USD could challenge resistance at 1.3590/1.3600 if the Fed tilts dovish this week.