The GBP strengthened at the start of the week, buoyed by improved market sentiment and expectations of a modest uptick in UK inflation. In the absence of major domestic data, Sterling was guided largely by risk appetite, maintaining stability in line with broader market trends. Looking ahead, anticipation of July’s CPI report which is expected to show an increase could lend additional support to the Pound, as persistent inflation tempers the chances of near term Bank of England rate cuts.
The Euro softened at the start of the week as risk aversion dampened demand for its perceived safe haven qualities. Ongoing uncertainty surrounding Ukraine peace talks added to the pressure. With no new Eurozone data releases and inflation holding steady, speculation over potential ECB rate cuts may intensify. While declining European gas prices offer some support, overall caution prevails, keeping the Euro constrained amid persistent market uncertainty and geopolitical risks.
The USD traded without clear direction early in the week, as cautious optimism over potential Russia/Ukraine peace talks weighed on safe haven demand. Hopes of progress following high level meetings tempered support for the greenback, while markets turned their focus to the upcoming Federal Reserve Jackson Hole symposium for policy guidance. Any signs of a softer Fed stance could leave the Dollar under pressure in the days ahead.
