The GBP is likely to stay resilient in the near term, supported by the Bank of England’s cautious stance and balanced market positioning. Although recent economic data has underwhelmed, much of the weakness is already priced into the currency. In the medium run, Sterling could find support from global risk sentiment and softer major peers, though lingering concerns over tax increases and structural challenges continue to weigh on long term confidence. We await the Autumn Budget!
The Euro recovered after early weakness tied to French political tensions and soft German sentiment, finding support in improved risk appetite and its inverse correlation with a weaker USD. While mixed German data provided little clarity, firmer inflation helped temper expectations of aggressive rate cuts. Attention now turns to upcoming Eurozone releases, which will be key in determining whether the Euro sustains its recent stability or comes under renewed pressure.
The USD stayed under pressure as expectations for a Federal Reserve rate cut in September grew, driven by weaker economic data and cautious comments from Chair Powell. Investors now turn to Friday’s nonfarm payrolls report for confirmation of labour market softness. Despite inflation recently surpassing forecasts, the Dollar remains weighed down by improving risk sentiment and lingering political concerns over Fed independence.
