• USD – The dollar remains under pressure, with the Dollar Index now 2% lower since the July Federal Reserve decision as markets reduce expectations for a September hike.

• EUR – The euro remains supported, with recent EUR/USD gains driven primarily by broad-based dollar weakness rather than strong eurozone-specific catalysts.
  

• GBP – Sterling faces a busy week of economic data, with inflation and wage figures likely to influence expectations around the Bank of England’s next policy moves.

USD:

The US dollar remains under pressure, extending the decline seen since the Federal Reserve’s July decision. Markets have become less convinced that another rate hike will arrive as early as September, despite some policymakers continuing to argue for a tighter policy stance. Recent softer inflation figures have encouraged investors to scale back those expectations, while attention now turns to the FOMC minutes on Wednesday for further insight into the committee’s thinking. The broader outlook remains relatively uncertain, with markets still anticipating the possibility of a rate increase before the end of the year. Today, attention is focused on Canada’s latest inflation figures, with headline CPI expected to edge higher while underlying inflation is forecast to remain below 2%.

EUR: 

The euro has enjoyed a strong run against the dollar over recent sessions, although the move has largely reflected weakness in the US currency rather than a significant improvement in the eurozone outlook. EUR/USD has maintained its upward momentum into the start of the week and is now approaching important technical levels. With little major economic data due from the eurozone in the coming days, the pair is likely to remain particularly sensitive to developments in US interest-rate expectations and broader dollar sentiment. Friday’s PMI figures will provide the main opportunity for eurozone-specific data to influence the market and could offer a clearer indication of the region’s economic health.

GBP: 

Sterling faces a particularly busy week, with several key releases likely to influence expectations for UK interest rates. Labour market figures, including wage growth and payroll data, are due tomorrow before attention shifts to inflation on Wednesday. Although headline CPI is expected to move higher, underlying inflation is forecast to ease slightly, while wage growth is also anticipated to moderate. If the data confirms a gradual cooling in domestic price and wage pressures, markets could become less confident that the Bank of England will need to raise rates later this year. Friday’s retail sales and PMI releases will provide further insight into the strength of the UK economy and could add to sterling volatility.