The euro remains well supported, benefiting from broad US dollar weakness and expectations that the ECB will raise rates on Thursday. The anticipated move is largely priced in, leaving the currency’s next direction dependent on the ECB’s updated outlook and whether policymakers signal scope for further tightening as elevated energy prices reinforce inflation risks. Resilient eurozone activity has supported the case for higher rates, although soft German industrial data and concerns about the growth impact of expensive energy are limiting conviction. Meanwhile, the dollar has come under pressure from the sharp yen rally, providing an additional lift to EURUSD, but escalating Middle East tensions and upcoming US producer and consumer inflation figures could revive Fed tightening expectations and cap further euro gains.

The pound remains steady against the dollar, supported by broad USD weakness as the BoJ-inspired yen rally weighs on the greenback, alongside the UK government’s emphasis on growth and fiscal discipline. However, sterling’s gains have lacked conviction as traders await monthly UK GDP data for a clearer signal on the domestic economy. Rising expectations for another Fed rate hike and escalating Middle East tensions are also providing some underlying support to the safe-haven dollar, leaving GBPUSD largely range-bound ahead of the UK growth report and key US inflation releases.

The yen has extended its rally to a seven-month high, driven primarily by expectations that the Bank of Japan will raise rates at next week’s meeting following hawkish signals from policymakers. The case for near-term tightening has been strengthened by faster wage growth and an upward revision to second-quarter GDP, while the prospect of a narrower yield gap has encouraged the unwinding of yen-funded carry trades and potential repatriation flows. Lingering intervention concerns and pressure from Washington for a stronger yen have added to the move, although elevated oil prices present a counterweight given Japan’s dependence on energy imports. Attention now turns to US inflation data, with hotter readings potentially reviving Fed tightening expectations and offering the dollar some support against the yen.

The Australian dollar remains well supported, benefiting from broad US dollar weakness and growing expectations that the Reserve Bank of Australia will raise rates again as resilient economic growth and persistent domestic inflation keep policy risks tilted toward further tightening. Stronger-than-expected Chinese inflation data offered little additional lift, suggesting the latest Aussie strength is being driven more by the RBA outlook and external dollar dynamics than by China-related optimism. The upside has nevertheless been restrained ahead of key US inflation data, with expectations of further Federal Reserve tightening, rising oil prices and escalating Middle East tensions supporting the safe-haven dollar and weighing on broader risk appetite.

The euro is holding firm above 1.1600, supported by expectations that the ECB will raise rates again on Thursday as elevated energy costs keep inflation risks alive, while stronger-than-previously-estimated euro-area growth has given policymakers more room to tighten. With a quarter-point increase largely priced in, the currency’s next move will depend more on President Lagarde’s guidance and whether the ECB signals that another hike could follow in December. The backdrop is not uniformly positive, however, with weak German industrial production and rising political uncertainty tempering confidence in the region’s outlook. Meanwhile, solid US employment data and this week’s US inflation releases are supporting Fed tightening expectations, while renewed US-Iran tensions and the associated safe-haven demand for the dollar are limiting the euro’s upside.

Sterling has edged higher against the dollar, supported by Chancellor Healey’s commitment to fiscal discipline and proposals to boost private investment through regional devolution, regulatory reform and lower business costs. However, the measures largely extend existing policy and have provided only modest support, with investors still concerned about strained public finances, elevated borrowing costs and the difficult choices facing the government in its October budget. The pound continues to benefit from expectations that persistent inflation could keep the Bank of England in a relatively hawkish stance, although fragile growth and the prospect of tighter fiscal policy argue against an aggressive tightening cycle. Meanwhile, stronger US employment data and increased expectations for a September Federal Reserve rate hike are limiting GBPUSD gains, placing greater emphasis on this week’s US inflation releases and Friday’s UK GDP report.

The yen has rallied to its strongest level since February, driven by a sharp unwinding of short-yen and carry-trade positions as investors price in faster Bank of Japan tightening. Japanese real wages recorded their strongest annual increase since 2021, while second-quarter growth was revised higher, reinforcing expectations that the BoJ will raise rates next week and may continue tightening thereafter. Speculation over capital repatriation by Japanese investors and the authorities’ demonstrated willingness to support the currency through intervention have added momentum to the move. Meanwhile, broad dollar weakness ahead of key US inflation data has outweighed support from hawkish Fed expectations and geopolitical tensions, intensifying the decline in USDJPY.

The Australian dollar has steadied after four consecutive sessions of gains, with China’s broadly in-line trade figures offering little fresh direction despite continued strength in exports. Domestically, a sharp deterioration in consumer confidence has weighed on sentiment, reflecting concerns over elevated interest rates, rising fuel costs, housing-market weakness and job security. Nevertheless, expectations that persistent inflation could force the RBA to tighten policy again, alongside Australia’s recent stronger-than-expected growth data, continue to provide underlying support. The Aussie has also benefited from broader US dollar weakness, although stronger US employment data and rising expectations for a September Fed rate hike are limiting further upside ahead of this week’s key US inflation releases.

The euro has been trading steadily around, with softer European growth signals offset by a more supportive ECB policy outlook and the dollar’s inability to sustain its post-payroll gains. German industrial production fell 1.1% in July against expectations for a 0.1% increase, driven by a partly temporary 9.2% slump in auto production, although weakness was broader, with capital and consumer goods output also declining. Excluding energy and construction, production fell 2.2%, but the three-month trend remained slightly positive, suggesting weakness rather than a fresh industrial collapse. Meanwhile, elevated energy prices are creating growth headwinds while also keeping inflation pressures high, reinforcing expectations for a 25-basis-point ECB rate hike on Thursday. The focus will be on President Lagarde’s guidance and whether the ECB leaves the door open to further tightening, while Friday’s US CPI report will be critical for determining whether stronger payrolls translate into a September Fed hike.

The pound has remained under modest pressure against the dollar, with GBPUSD struggling around 1.3500 as the greenback retains support from stronger-than-expected US payrolls and rising expectations that the Federal Reserve could raise rates in September. Escalating US-Iran tensions and associated energy-price risks have reinforced demand for the safe-haven dollar, while also posing a potential inflationary headwind for the UK economy. Sterling’s downside has nevertheless been limited by the Bank of England’s relatively hawkish stance and the absence of a clear domestic catalyst. Attention now turns to US inflation data for direction on Fed policy, followed by Friday’s UK monthly GDP report for a clearer reading on British growth and the BoE outlook.

The yen is consolidating near 156 against the dollar after outperforming sharply last week, with USDJPY falling from around 160 to 155.29. The move was driven primarily by a hawkish shift in Bank of Japan expectations after board member Takata left the door open to larger or back-to-back rate hikes, reinforcing speculation that the BoJ could tighten more aggressively as inflation pressures persist. Expectations for a September rate increase, potential capital repatriation and lingering intervention concerns have further discouraged yen-funded carry trades, although stronger US payrolls and renewed Fed tightening expectations have limited the yen’s advance. Attention now turns to Friday’s US CPI report, which will shape the US-Japan yield differential and likely determine whether the yen can extend its recovery.

The Australian dollar remains well supported near 0.7200, close to its strongest level since mid-May, as resilient domestic fundamentals reinforce expectations that the RBA may raise rates again. Stronger-than-expected second-quarter growth, firm household spending and persistent underlying inflation have increased the probability of a September hike, while elevated energy prices add to Australia’s inflation risks. The Aussie’s upside has nevertheless been contained by renewed Fed tightening expectations following the stronger US payrolls report, rising US yields and safe-haven dollar demand amid escalating US-Iran tensions. Attention now shifts to US inflation data, which will be critical in determining whether the Fed-RBA policy outlook continues to support AUDUSD or allows the dollar to regain momentum.

The euro has been steady above 1.1600 against the US dollar, with volatility subdued as markets await the US nonfarm payrolls report for clearer direction on the Federal Reserve’s September policy decision. The single currency has drawn some support from encouraging German factory orders, which rose a stronger-than-expected 2.5% in July, while expectations that the ECB remains prepared to tighten further are also helping underpin the euro. However, upside momentum has been limited by reluctance to sell the dollar ahead of payrolls and next week’s more decisive US inflation data. Attention now turns to Eurozone retail sales and comments from ECB Chief Economist Philip Lane, although the broader direction for EURUSD will likely depend on whether incoming US employment and inflation figures revive or further unwind expectations for a September Fed rate hike.

The pound has regained some ground above 1.3500, supported by a more hawkish Bank of England policy outlook after Chief Economist Pill argued for an early rate increase to prevent inflation from remaining above target. Pill’s preference for raising Bank Rate to 4% reinforces expectations that the BoE could tighten further, with markets assigning only a modest probability to a September move but a much stronger chance of an increase by November. Still, his insistence that an initial hike need not begin a prolonged tightening cycle has tempered the boost to sterling, particularly given uncertainty surrounding the Middle East conflict and its implications for energy prices and growth. With the UK calendar relatively quiet, GBPUSD direction now rests largely on the US August employment report, where a strong result could revive Fed tightening expectations and dollar demand, while a softer payrolls print would give the pound more room to extend its recovery.

The yen has been one of the stronger major currencies this week, supported by a sharp hawkish repricing of Bank of Japan policy expectations, softer US Treasury yields and speculation that Japanese authorities may have intervened to support the currency. Markets have moved to fully price a 25-basis-point BoJ rate hike at the September meeting, with the possibility of another increase in December reinforced by stronger Japanese services activity and persistent price pressures. At the same time, Fed Governor Christopher Waller’s more encouraging comments on inflation have reduced expectations for a September Fed hike, narrowing the relative yield advantage of the dollar. The yen has given back some ground ahead of the US payrolls report as traders reduce bearish-dollar positions, but USDJPY remains on course for a sizeable weekly decline, with the broader fundamental balance continuing to favor the yen unless US employment data materially revives Fed tightening expectations.

The Australian Dollar has pushed higher above 0.7200, supported by an increasingly favorable shift in relative rate expectations. Stronger-than-expected Australian second-quarter growth has reinforced the view that domestic demand remains resilient, lifting market pricing for a September RBA rate hike to around 70%. Meanwhile, the US Dollar has lost some ground after Fed Governor Christopher Waller signaled a preference for keeping rates unchanged this month if inflation continues to ease, prompting traders to scale back Fed hike expectations. Australia’s slightly narrower July trade surplus has had limited impact, particularly after an upward revision to June, leaving the RBA outlook as the dominant local driver. Attention now turns to the US employment report, which could determine whether the Aussie extends its gains or faces renewed pressure from a repricing of the Fed outlook.

The euro has steadied below 1.1600 against the dollar but remains under pressure as widening rate expectations and geopolitical risks offset increasingly hawkish signals from the ECB. Fed Chair Kevin Warsh’s warning that further tightening may be necessary if inflation does not return convincingly toward target has driven a sharp rise in expectations for a September Fed hike, supporting US yields and the dollar. At the same time, escalating US-Iran tensions and higher oil prices are weighing on the euro through safe-haven dollar demand and renewed concerns over the terms-of-trade impact on the energy-importing eurozone. ECB officials have also kept the door open to further tightening, with Makhlouf warning that rates may need to rise if inflation moves in the wrong direction and Nagel pointing to strong expectations for a September hike. This ECB repricing is providing some underlying support, but for now the dollar’s yield advantage, elevated oil prices and geopolitical uncertainty are keeping EUR/USD gains contained ahead of US ISM Services and Friday’s employment report.

The pound remains under pressure near a three-week low against the dollar, driven primarily by renewed US dollar demand as hawkish Fed expectations and escalating US-Iran tensions reinforce the greenback’s yield and safe-haven appeal. Sterling is also facing domestic headwinds from a sharp rise in UK gilt yields, with higher borrowing costs intensifying concerns over the government’s limited fiscal headroom ahead of the October budget. The Bank of England is expected to leave rates unchanged this month, although persistent inflation and rising energy costs have kept the possibility of another hike later this year alive, providing the pound with some underlying support. For now, however, mixed UK activity data and fiscal uncertainty leave GBPUSD largely dependent on US developments, with the ISM Services PMI and Friday’s employment report set to shape Fed expectations and the pair’s next move.

The yen has been one of the stronger major currencies today, extending its rebound from the 160.00 area as intervention concerns, increasingly hawkish Bank of Japan signals and stronger domestic data reinforce expectations for a rate hike in mid-September. Japan’s services PMI rose to a five-month high of 52.5 in August, while near-record increases in selling prices strengthened the case for further tightening and helped offset the dollar support coming from Fed hike expectations. However, the wider yen outlook remains constrained by the still-large US-Japan interest-rate differential, concerns that rising Japanese bond yields partly reflect fiscal and debt-supply risks, and higher oil prices for energy-importing Japan. Intervention risk should continue to discourage aggressive yen selling near 160.00, but July’s intervention experience suggests official action alone is unlikely to produce a lasting reversal. Near-term direction will now depend heavily on US labor data and Fed commentary, with weak figures potentially extending the yen’s recovery and resilient data threatening a renewed move higher in USDJPY.

The Australian dollar has been underpinned by rising expectations that the RBA may need to tighten policy further after hotter-than-expected inflation and stronger second-quarter growth, helping the currency outperform despite a generally firm US dollar. Domestic data offered modest additional support, with Australia’s July trade surplus of A$1.92 billion exceeding forecasts, while China’s services PMI improved to 51.4, although neither release generated a significant market reaction. The upside has remained contained by growing expectations for a September Fed rate hike and escalating US-Iran tensions, which have supported the dollar through higher US yields and safe-haven demand. Attention now turns to the US ISM Services PMI and Friday’s payrolls report, which should help determine whether AUDUSD can extend its recovery or remains capped around current levels.

The euro has remained under pressure against the dollar as escalating US-Iran tensions, higher oil prices and rising Treasury yields reinforce safe-haven demand for the greenback and expectations of another Federal Reserve rate hike. The euro’s losses have been limited by a more hawkish ECB outlook after headline Eurozone inflation accelerated from 2.9% to 3.3% in August, strengthening the case for a 25-basis-point rate increase at next week’s meeting, although the decline in core inflation to 2.4% suggests underlying pressures remain better contained. The energy shock is therefore a mixed fundamental for the euro. It supports ECB tightening expectations and European yields in the near term, but also raises concerns about the region’s growth outlook and terms of trade. For now, relative rate expectations and geopolitical demand continue to favor the dollar, with attention turning to this week’s US labor-market data for the next directional catalyst.

The pound has remained under pressure, as the renewed escalation in US-Iran hostilities has driven demand for the safe-haven dollar and weighed on broader risk sentiment. Sterling has also received limited support from the domestic policy outlook after Bank of England Governor Andrew Bailey said second-round inflation effects remain subdued and pointed to the continued softening in the labor market, suggesting the Bank can afford to monitor the situation rather than respond urgently. Although markets continue to price additional BoE tightening over the coming months, Bailey’s cautious comments have tempered the pound’s relative rate advantage. Near-term direction is likely to remain heavily influenced by geopolitical developments and Friday’s US employment report, which will shape expectations for Federal Reserve policy and the dollar.

The yen remains under heavy pressure, with USDJPY trading above 160 at its highest level since late July. Fiscal concerns have intensified after the global bond selloff pushed Japan’s 10-year yield to 3% for the first time since 1996, raising questions about the cost of servicing the country’s enormous debt burden as the government pursues aggressive investment plans. Expectations for a Bank of Japan rate hike this month have strengthened, helped by mounting pressure from US officials, but this has provided little support given Japan’s persistently wide yield disadvantage and the yen’s continued role as a funding currency. At the same time, renewed expectations for a Federal Reserve rate hike, rising oil-driven inflation risks and escalating US-Iran tensions are supporting the dollar, leaving the yen vulnerable despite growing intervention risk around current levels.

The Australian dollar has found support from stronger-than-expected domestic growth data, with the economy expanding 0.4% in the second quarter and annual growth of 2.1% also comfortably beating forecasts. The figures reinforce the view that the Australian economy remains resilient and give the RBA additional room to maintain a restrictive policy stance, particularly with inflation risks still elevated. However, the currency’s gains have been limited by renewed US dollar demand as surging oil prices and rising global bond yields revive inflation concerns and support expectations that US interest rates may remain higher for longer. Mixed US data, including softer JOLTS job openings but a still-expansionary ISM manufacturing reading, has done little to meaningfully weaken the dollar, leaving the Australian currency caught between supportive domestic fundamentals and a more challenging global backdrop

The euro has struggled to extend gains as renewed dollar demand, driven by rising expectations for a September Fed rate hike and escalating US-Iran tensions, offsets an increasingly hawkish ECB outlook. Higher energy prices and Germany’s August inflation increase to 2.9% have reinforced expectations that the ECB will raise rates this month, with policymakers warning that persistent energy-driven inflation may require further tightening. This policy support has helped limit euro weakness, but with markets also repricing the Fed in a more hawkish direction, EURUSD remains caught between competing rate-hike expectations. Attention now turns to the preliminary Eurozone inflation reading, followed by key US manufacturing and labor-market data, for clarity on which central bank is likely to pursue the more forceful tightening path.

Sterling has come under modest pressure against the dollar, with GBPUSD slipping as Fed Chair Kevin Warsh’s hawkish Jackson Hole message boosted US yields and sharply increased expectations for a September rate hike. At the same time, downside pressure on the pound has been limited by a more constructive Bank of England outlook, with markets assigning around a 60% probability to a 25-basis-point hike at the September meeting and pricing further tightening by year-end. This leaves sterling caught between renewed dollar strength and expectations that UK interest rates may also need to remain elevated, while attention is increasingly turning toward incoming inflation data and the October UK budget for clarity on the country’s fiscal and monetary-policy outlook.

The yen remains under heavy pressure, with USDJPY pushing toward 160.00 despite Japan’s 10-year government bond yield reaching 3% for the first time since 1996. The rise in yields reflects mounting fiscal and inflation concerns, but has not been enough to support the currency as investors remain focused on Japan’s still-unfavorable rate differential with the United States and doubts over how aggressively the Bank of Japan will tighten policy. US Treasury Secretary Scott Bessent’s expectation that Japanese authorities and the BoJ will take action to strengthen the yen has increased attention on the September 18 policy decision, while comments from Japanese officials stressing the importance of orderly currency moves have also revived intervention risk. For now, however, markets appear unconvinced that verbal pressure alone will reverse the yen’s weakness, leaving the currency vulnerable unless the BoJ delivers a clearly more hawkish signal or authorities intervene directly.

The Australian dollar has remained well supported, benefiting from stronger Chinese manufacturing data after the RatingDog PMI rose to 51.5 in August from 50.9, an encouraging signal given Australia’s close trade exposure to China. Domestic data were also mildly supportive, with Australian building approvals falling 3.6% in July, a smaller decline than expected, while annual approvals growth edged up to 9%. However, the currency’s upside has been limited by renewed US dollar demand as hawkish Federal Reserve commentary strengthens expectations for a possible September rate hike. With Fed officials continuing to emphasize persistent inflation and the need for faster progress toward the 2% target, the near-term direction for the Australian dollar remains a balance between improving China-sensitive sentiment and a widening policy advantage in favor of the US dollar.

The euro is trying to recover after the latest dip, supported by increasingly hawkish ECB expectations as officials emphasize upside inflation risks from energy prices and resilient growth. Recent comments from Isabel Schnabel have reinforced expectations for a September rate hike and the possibility of further tightening in the coming quarters, although lingering concerns about the Eurozone growth outlook continue to limit demand for the currency. Attention now turns to preliminary German inflation data, with both headline CPI and harmonized inflation expected to accelerate in August. A stronger reading would reinforce the case for ECB tightening and could provide the euro with additional support. At the same time, gains have been restrained by Fed Chair Kevin Warsh’s warning that policymakers still have work to do if underlying inflation does not move convincingly toward target, which has pushed up expectations for a September Fed hike and kept the broader rate differential supportive of the dollar.

The pound has started the week on a firmer footing, recovering some of Friday’s heavy losses as the US dollar eases from a nearly two-week high following month-end demand. Sterling has also drawn modest support from the UK government’s renewed emphasis on fiscal discipline ahead of the October Budget, though upside remains limited by the widening policy-rate outlook between the Bank of England and Federal Reserve. Markets have pushed expectations for the next BoE rate increase into 2027, while Fed Chair Kevin Warsh’s hawkish comments have revived the possibility of a September hike. Renewed US-Iran tensions are providing an additional layer of support for the safe-haven dollar, leaving the pound vulnerable as attention shifts to this week’s US data, culminating in Friday’s employment report.

The yen remains under pressure near a one-month low against the dollar, with USDJPY hovering around the 160.00 level as the wide US-Japan interest-rate gap continues to encourage carry-trade demand. The Bank of Japan raised rates to 1.00% in June and markets see a strong chance of another increase in September, but this has been outweighed by expectations that the Federal Reserve could also tighten policy following Chair Kevin Warsh’s hawkish Jackson Hole remarks. Concerns surrounding Japan’s deteriorating public finances and expansionary fiscal policy have added to the yen’s weakness, while comments from US Treasury Secretary Scott Bessent describing the recent move as contained have reduced expectations for coordinated intervention. Renewed US-Iran hostilities have also favored the dollar as the market’s preferred safe haven, although the proximity of USDJPY to 160.00 should keep the threat of unilateral Japanese intervention firmly in focus.

The Australian dollar remains supported by a relatively hawkish domestic policy outlook, after strong inflation data reinforced expectations that the Reserve Bank of Australia may need to raise rates again. The currency has also benefited from softer US Treasury yields and a modest pullback in the US dollar, although its upside has been constrained by renewed expectations for a September Federal Reserve rate hike and escalating US-Iran tensions, which have encouraged safe-haven demand for the greenback. More broadly, the Aussie remains sensitive to shifts in global risk appetite and the outlook for China, leaving the contrast between increasingly hawkish RBA expectations and continued US dollar support as the key near-term driver.

The euro has come under renewed pressure against the US dollar, with EURUSD slipping as markets brace for Fed Chair Warsh’s Jackson Hole address. The dollar has regained support from sticky US inflation and increasingly hawkish remarks from Fed officials, reinforcing the possibility that US monetary policy may need to remain restrictive or tighten further. The euro’s downside has nevertheless been cushioned by expectations that the ECB could deliver another rate increase as elevated energy costs threaten renewed inflation pressure. For now, however, the pair remains primarily driven by the US side of the equation, with Warsh’s assessment of inflation and the policy outlook likely to determine whether the dollar’s recovery extends.

The pound has steadied after retreating from a six-month high, with the recent pullback driven largely by a scaling back of Bank of England tightening expectations. Lower oil prices have eased concerns that the recent inflation pickup will require an immediate policy response, and markets no longer fully price a 25-basis-point BoE rate hike until early 2027. Sterling nevertheless remains relatively well supported by still-elevated UK inflation, attractive gilt yields and a reasonably resilient domestic economy, although signs of softness in the labor market argue against near-term tightening. With little major UK data currently driving trade, the pound’s immediate direction is being dictated primarily by the US dollar and expectations surrounding Fed Chair Warsh’s Jackson Hole address, where any hawkish signal could place renewed pressure on GBPUSD.

The yen has strengthened modestly after hotter Tokyo inflation reinforced expectations that the Bank of Japan could raise rates as early as September. Headline, core and underlying inflation measures all accelerated in August, with the data strengthening the case for further policy normalization. BoJ Deputy Governor Himino also emphasized the need to pay greater attention to upside inflation risks, although the yen initially struggled after he stopped short of explicitly signaling an imminent hike. The currency’s gains remain constrained by Japan’s still-wide yield disadvantage against the US, leaving USDJPY highly sensitive to Fed Chair Warsh’s Jackson Hole speech and any fresh guidance on the US interest-rate outlook.

The Australian dollar remains well supported, with hotter-than-expected July inflation sharply increasing expectations that the Reserve Bank of Australia will need to raise rates again. Markets are now fully pricing a hike by November and assign a meaningful chance of an earlier move in September, while several major Australian banks have brought forward their tightening forecasts. The resulting yield support, alongside a broader preference for higher-yielding currencies, has helped AUDUSD extend its advance through 0.7200, although the next directional catalyst will likely come from Fed Chair Warsh’s Jackson Hole speech and its implications for US interest rates, Treasury yields and the US dollar.

The euro remains well supported by increasingly hawkish ECB expectations, with markets pricing a strong chance of another rate increase in September and further tightening by year-end. ECB officials, including Schnabel, have highlighted upside inflation risks from the prolonged Middle East conflict and the surprising resilience of the eurozone economy, reinforcing the view that borrowing costs may need to rise further. This policy backdrop has helped EURUSD hold up, although gains have been kept in check by consolidation following the recent rally and uncertainty surrounding the US rate outlook. Attention now shifts to Fed Chair Warsh’s Jackson Hole speech, particularly after US inflation data offered little clarity, with core PCE matching expectations but headline inflation coming in slightly hotter.

Sterling remains well supported near six-month highs, underpinned by resilient UK data, elevated gilt yields and lingering Bank of England tightening risk after July inflation rose to 2.9% and three MPC members voted for a rate hike. However, the pound’s broader August advance has also owed heavily to US dollar weakness, leaving it vulnerable when US data or Fed expectations support the greenback, as seen following Wednesday’s slightly firmer headline PCE reading. With no major UK releases left this week, domestic policy expectations are unlikely to shift meaningfully, while concerns over high borrowing costs and limited fiscal headroom remain a background restraint. Near-term direction should therefore be driven primarily by the dollar and Fed Chair Warsh’s Jackson Hole address on Friday, with markets looking for clarity on how the Fed will respond to still-elevated inflation.

Yen declines have stalled out as optimism around a potential US-Iran ceasefire and the reopening of commercial shipping routes through the Strait of Hormuz has eased geopolitical concerns and restrained the dollar. Still, yen gains remain limited by Japan’s deteriorating fiscal outlook and the wide US-Japan interest-rate differential, particularly as sticky US inflation keeps the possibility of further Fed tightening alive. Markets are now looking to Friday’s Tokyo CPI report for clues on the pace of future Bank of Japan rate hikes, while Fed Chair Warsh’s Jackson Hole speech will be critical in shaping the US rate outlook and the next move in USDJPY.

The Australian dollar remains well supported by a sharp repricing of RBA policy expectations after hotter-than-expected July inflation reinforced concerns that price pressures are proving persistent. Major Australian banks now expect the cash rate to rise to 4.60%. The currency has largely shrugged off a steep decline in second-quarter private capital expenditure, with broader indicators continuing to suggest an economy that is soft rather than seriously weak. Still, the upside has been limited by a firm US dollar following slightly hotter headline PCE inflation, while traders await further policy direction from Fed Chair Warsh at Jackson Hole.