Dollar in the Spotlight: Data and Diplomacy to Dominate the Week.

• US CPI in focus: July’s core CPI expected at 0.3% MoM, but we see risk of 0.4%, which could limit dovish repricing without derailing September Fed cut bets.

• Alaska summit: Trump–Putin talks may bring only preliminary Ukraine ceasefire terms; oil and bonds show cautious optimism.

• Eurozone outlook: Little near-term domestic support; ZEW survey likely to worsen, with ECB cut still expected by year-end despite slow repricing.

• Sterling drivers: BoE’s narrow cut last week leaves GBP reliant on strong jobs and GDP data to sustain momentum.

• FX implications: Short-term USD gains on strong CPI likely to fade; euro could strengthen if Fed easing expectations persist.

USD: Markets Await Inflation and Alaska Summit
This week’s focus is firmly on two events: Tuesday’s US inflation print and Friday’s high-profile meeting between President Donald Trump and Russian President Vladimir Putin in Alaska. Markets are looking for core CPI to rise 0.3% MoM (3.0% YoY) in July, a pace seen as compatible with the Fed delivering a widely expected September rate cut (90% priced in), especially given recent labour market weakness. We see potential for a stronger 0.4% MoM reading, which could keep a lid on further dovish bets in the short run, but is unlikely to derail September cut expectations. A firmer inflation number may lend the dollar some temporary support, though we expect that to fade as other data confirm slowing jobs and activity.

The US–Russia talks are expected to be complex. Reports suggest Putin may only accept a ceasefire if Ukraine offers significant territorial concessions, with Trump’s leverage centred on sanctions and trade pressure on Russia’s partners like India. The scale of Russia’s slowdown could be a bargaining chip, but the lack of Ukrainian and European delegates suggests any deal would be preliminary.

Oil prices—down 8% since early August—signal tentative optimism for a truce, echoed by a 2% rally in Ukrainian bonds. A genuine ceasefire could boost the euro, particularly against the dollar, yen, and Swiss franc. That said, G10 currencies’ sensitivity to energy prices and Ukraine-related headlines has diminished since 2022–2023, limiting the FX impact.

This week’s US calendar also features the NFIB survey (Tuesday), PPI (Thursday), and retail sales (Friday), with Fed commentary in focus as markets digest July’s sharp jobs data revisions. Ahead of CPI, a quiet Monday is likely in FX.

EUR: Ukraine Hopes Tempered by Soft Domestic Outlook
Friday’s summit could influence the euro, but uncertainty over outcomes and weaker FX sensitivity to the Ukraine conflict mean we’re not altering our EUR stance for now. Domestically, the eurozone offers little immediate upside. The ZEW survey—expected to worsen after the unpopular US–EU trade deal—may highlight the toll of 15% US tariffs and reawaken dovish voices at the ECB.

Markets see little chance of a September cut, and modest odds for October (20%) and December (50%). We see scope for another cut this year, though August’s ECB silence and subdued inflation mean repricing could be slow. Any euro weakness on strong US CPI is likely to be short-lived, with buyers eyeing Fed easing later this year. We still anticipate EUR/USD breaking above 1.170 in the near term.

GBP: Data Must Back BoE Hawks
The Bank of England’s razor-thin decision to cut rates last week could keep sterling supported—if upcoming data validate hawkish MPC members’ focus on inflation and their relaxed view on slowing jobs.

July employment data is due tomorrow, with a consensus forecast of -18k payrolls versus June’s -41k. Past patterns suggest scope for weak initial prints later revised upward. Thursday’s Q2 GDP is expected at 0.2% QoQ (above the 0.1% consensus), reflecting tariff effects seen globally.

EUR/GBP remains heavily data-dependent. A drop below 0.860 is possible if BoE cuts are priced out, but lingering easing expectations and the euro’s resilience may make 0.870 more realistic into Q4.