The Weekly Market Update
News & Insights
w/c 11th August: Stagflation Looms
GBP
The British Pound rose after a Bank of England rate cut however many analysts warn stagflation, rising inflation with weak growth, threatens lasting strength. With the Bank split and credibility strained by cutting rates while forecasting higher inflation, policy error risks by the Bank of England grow. Overall, strategists broadly expect Sterling weakness as interest rate cuts or hikes both risk currency downside unless UK growth rebounds, placing pressure on the government to deliver economic improvement.
EUR
The Euro has been supported by expectations that the European Central Bank will pause its interest rate easing cycle in September. Some economists have delayed rate cut forecasts, reinforcing the Euro’s strength. Alongside that, improved market sentiment over a potential end to the Ukraine war, following news of a possible Trump-Putin meeting, adds further support to the Euro. Overall, hopes of de-escalation and a cautious ECB stance continue to underpin Euro momentum.
USD
The U.S. dollar steadied ahead of July inflation data, with markets eyeing a likely Federal Reserve rate cut in September after weak labour reports. As a result, Bearish sentiment rose, pushing net short positions to their highest since 2021. Fed Governor nominee Miran’s dovish views support expectations of interest rate easing, while strategists predict medium-term USD weakness amid growing inflation and trade uncertainties.
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