Dollar Resilient to Dovish Chatter; Euro Holds Gains, Pound Lifted by Data.

• USD: Bessent’s call for deeper Fed cuts barely moved the dollar, with markets sticking to a 25bp September cut view.

• PPI Focus: July’s PPI expected at +0.2% for both headline and core, likely reinforcing a “manageable inflation” narrative.

• EUR/USD: Maintains upside momentum ahead of Trump-Putin summit; volatility pricing remains low.

• UK Data: Q2 GDP and June factory output beat forecasts, showing stronger economic resilience.

• GBP Outlook: Solid data may slow BoE rate-cut pace, keeping sterling supported.

USD: Minimal Impact from Bessent’s Fed Remarks
Comments from Treasury Secretary Scott Bessent yesterday bolstered market expectations for a more dovish Federal Reserve stance. The USD two-year swap rate dropped a further 6bp to just below 3.40%, now sitting around 10bp lower than before the latest CPI release. Bessent argued for Fed rates to be 150–175bp lower and suggested a 50bp cut in September. For now, markets aren’t buying it—pricing in no more than 25bp—unless Jackson Hole (21–23 August) or a notably weak August jobs report shifts sentiment.

Despite starting the session weaker, the dollar barely reacted to Bessent’s dovish push. One possible stabilising factor was his rejection of EJ Antoni’s idea to reduce the frequency of jobs reports.

Today’s focus is July PPI, forecast at +0.2% for both headline and core, which would reassure markets that inflation remains manageable. We’ll also watch US continuing claims after last week’s sharp rise to 1.974 million.

The looming Trump-Putin meeting tomorrow may temper appetite for additional USD shorts in the near term, though the broader bias for the greenback remains negative.

EUR: Steady Climb Ahead of US-Russia Talks
EUR/USD is heading into tomorrow’s summit with solid upward momentum. Options markets are signalling little concern over volatility—one-week implied volatility is sitting at the low end of its recent range, matching realised levels.

On the eurozone data front, the second 2Q GDP reading is due today, likely confirming the preliminary +0.1% QoQ figure that was largely dismissed due to tariff distortions. June industrial production data is also expected, with a soft result anticipated after Germany’s surprise -3.6% YoY drop.

EUR/USD is likely to hover near 1.170 today, with risk still tilted towards further gains.

In the UK, 2Q GDP exceeded expectations at +0.3% QoQ and +1.2% YoY, suggesting resilient underlying growth despite trade headwinds. While supportive for gilts ahead of the Autumn fiscal statement, it doesn’t shift the Bank of England’s focus away from inflation and the labour market—hence sterling’s muted initial move.

GBP: Pound Boosted by Robust Growth and Factory Data
Sterling strengthened on Thursday after stronger-than-forecast UK GDP and manufacturing figures. ONS reported the economy expanded 0.3% in Q2 versus a 0.1% forecast, following 0.7% growth in Q1. June output rose 0.4% after a 0.1% contraction in May, beating expectations for just +0.1%.

Manufacturing and industrial production also outperformed, rising 0.5% and 0.7% MoM in June after sharp declines in May.

This resilient performance could allow the Bank of England to maintain a slower pace of rate cuts, lending support to the pound. Earlier this month, the BoE lowered rates by 25bp to 4.00% but kept a “gradual and careful” approach—underscored by the fact that four of nine policymakers voted to keep rates unchanged.