Euro and Pound Await New Drivers: Inflation and UK GDP in Focus

The euro and pound are showing subdued moves against the US dollar and have shifted into consolidation following their recent price action. Market participants are reluctant to establish new positions ahead of a key batch of macroeconomic data that could alter expectations for the future policy stance of the major central banks.

The next key market catalysts will be inflation data from Germany and the US. Today, Germany’s annual CPI is forecast to accelerate to 2.9% from 2.8%, which could reinforce expectations of further policy tightening by the ECB and provide support for the euro. However, tomorrow’s US inflation data will be the main event. Headline CPI is expected at 3.4% year-on-year and 0.4% month-on-month, while core CPI is forecast at 2.4% and 0.2%, respectively. Following the strong employment report, higher-than-expected inflation could strengthen expectations that the Federal Reserve will maintain a hawkish stance and support the dollar, while signs of easing price pressures could limit its upside.

For the pound, tomorrow’s UK economic data will provide an additional catalyst. UK GDP for July is forecast to show no growth after expanding by 0.3% in the previous month, despite expectations of a recovery in manufacturing output. Weaker-than-expected figures could reinforce expectations of a more dovish stance from the Bank of England and limit the recovery potential of GBP/USD.

EUR/USD

Over recent trading sessions, EUR/USD has been consolidating within a relatively narrow range of 1.1570–1.1650. A breakout and sustained move above 1.1650 could pave the way for a retest of the August high near 1.1710. A sustained move below 1.1570 could trigger further downside towards 1.1500.

Key events for EUR/USD:

• today at 09:00 (GMT+3): Germany’s Consumer Price Index (CPI);
• today at 15:30 (GMT+3): US Producer Price Index (PPI);
• today at 15:30 (GMT+3): US initial jobless claims.

GBP/USD

Following a retest of the 1.3470 support level on the daily chart, a Stick Sandwich pattern has formed. If the price establishes itself above 1.3500 and this level turns into support, the advance could continue towards 1.3640–1.3680. A sustained move below 1.3470, by contrast, would increase the likelihood of a deeper downside correction.

Key events for GBP/USD:

• tomorrow at 09:00 (GMT+3): UK Gross Domestic Product (GDP);
• tomorrow at 09:00 (GMT+3): UK manufacturing output;
• tomorrow at 15:30 (GMT+3): US core Consumer Price Index (CPI).

Overall, EUR/USD and GBP/USD remain in consolidation near key technical levels ahead of a new batch of macroeconomic data. For the euro, Germany’s inflation figures will provide an additional catalyst, while the pound is likely to remain sensitive to UK GDP data. However, US inflation will remain the main focus for both pairs, as it could reshape expectations for Federal Reserve policy and determine the dollar’s next direction.

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