FX Market Update: Dollar Pulls Back as Inflation, UK Growth and Eurozone Data Take Focus.

USD – The dollar surged to fresh highs despite weaker JOLTS and consumer confidence data, before pulling back overnight, with markets now focused on core PCE, GDP, and ADP employment data.

EUR – Remains under pressure after testing its lowest level since May 2025, although it has recovered slightly overnight, with German inflation now in focus following a stronger-than-expected French reading.

GBP – Sterling is one of the stronger-performing currencies this morning after UK Q2 growth was revised up to 0.5%, while political headlines around the EU and pension reforms have also supported the pound.

USD: The US dollar surged to fresh highs yesterday despite disappointing JOLTS and consumer confidence data, before pulling back overnight. Job openings fell from 7.3m to 7.1m, while consumer confidence weakened significantly from 89.4 to 81.9. Today’s focus is on August core PCE, the third estimate of Q2 GDP, and ADP non-farm employment. Core PCE, the Fed’s preferred measure of inflation, is expected to remain steady at 3.3% year-on-year, with any surprise likely to be important for expectations around the October rate decision.

EUR: The euro tested its lowest level since May 2025 yesterday, weighed down by dovish comments from ECB President Lagarde and a softer risk environment. It has recovered slightly overnight, with attention now turning to German CPI inflation later today, which is expected to rise to 3.2% from 2.9% in August. French inflation also surprised to the upside this morning, coming in at 3.4% against expectations.

GBP: Sterling is one of the stronger-performing currencies this morning after UK Q2 growth was revised up to 0.5%. Burnham also floated the idea of the UK rejoining the EU, while his Labour conference speech included proposals to move from a triple lock to a double lock on pensions. With no further major UK data today, US and eurozone developments are likely to drive near-term FX direction.

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