Jackson Hole Countdown: Will Inflation Tip the Scales?

Summary

A data heavy week lies ahead, culminating in the Jackson Hole Economic Policy Symposium. Markets are poised for significant FX moves around UK CPI and activity data, FOMC minutes and Chair Powell’s address, and President Lagarde’s remarks alongside Euro Area PMIs. The near term direction for USD, GBP, and EUR will hinge on whether inflation cools further and whether central banks validate or push back on easing expectations.

• USD: Two way risk into Powell’s speech. Any explicit validation of September rate cuts is USD negative. A hawkish pushback supports USD.
• GBP: Sensitive to UK CPI and retail data; stronger inflation or resilient demand tilts GBP firmer into the BoE’s 18 Sep decision.
• EUR: Direction set by Lagarde’s tone and PMIs. Hawkish hints or resilient PMIs support EUR; a dovish lean weighs.

Policy & Inflation Snapshot (as of 18 Aug 2025)

Region	Policy Rate	Next Rate Decision	Latest CPI YoY	Next CPI/Inflation Print
UK	4.00%	Wed 18 Sep 2025	3.6%	Wed 20 Aug 2025
US	4.50%	Wed 17 Sep 2025	2.7%	Thu 11 Sep 2025
Euro Area	2.15%	Thu 11 Sep 2025	2.0%	Wed 20 Aug 2025

Higher than expected inflation tightens financial conditions by lifting rate expectations and usually supports the local currency; weaker than expected inflation weighs on it. The size of the surprise versus consensus and the persistence of “core” components matters most for FX.

The Week Ahead – What Each Print Means & Why FX Cares

United Kingdom

Wed 20 Aug – CPI (July/Aug)

• What it is: Headline and core consumer inflation. Core (ex-food/energy) is the best guide to underlying pressures.
• Why it matters for FX: Above-consensus CPI pushes BoE cut expectations out, typically lifting GBP; a downside miss pulls them forward, weighing on GBP.
• What to watch: Core services, rent equivalents, and inflation breadth; revisions to prior months.

Thu 21 Aug – PMIs

• What it is: Timely read on manufacturing and services growth (>50 = expansion).
• Why it matters for FX: Strong PMIs imply resilient demand and pricing power GBP supportive; sub-50 or broad deterioration GBP headwind.
• What to watch: Services new orders, input vs. output prices, employment gauges.

Fri 22 Aug – Retail Sales

• What it is: Volume/value of retail spending; a proxy for consumer health.
• Why it matters for FX: Upside surprises suggest durable demand and stickier inflation supports GBP; weak prints add to growth worries weighs on GBP.
• What to watch: Control group sales, prior revisions, online share, fuel effects.

United States

Wed 20 Aug – FOMC Minutes (July meeting)

• What it is: Detailed discussion of inflation progress, growth risks, and policy reaction function.
• Why it matters for FX: A dovish tilt (greater comfort with disinflation) pressures USD; hawkish concern about inflation persistence supports USD.
• What to watch: Balance of risks language; tolerance for near-term easing; labour market assessment.

Thu 21 Aug – PMIs

• Why it matters for FX: Strong activity data may temper September cut odds USD supportive; weaker momentum weighs on USD.
• What to watch: Services prices charged, manufacturing new orders, supplier delivery times.

Thu–Sat 21–23 Aug – Jackson Hole Symposium

Fri 22 Aug – Chair Powell Keynote

• What it is: Annual policy forum; keynote often rich in forward guidance.
• Why it matters for FX: If Powell validates imminent cuts or emphasises downside growth risks USD softer with global risk boost. If he stresses inflation vigilance or data dependence with a high bar for cuts USD firmer, risk sentiment wobbles.
• What to watch: Framing of “real rates,” neutral rate, and weight given to labour vs. inflation.

Euro Area

Wed 20 Aug – President Lagarde Speech

• What it is: Policy guidance ahead of the 11 Sep meeting.
• Why it matters for FX: Hawkish emphasis on inflation stickiness or slower balance sheet runoff supports EUR; dovish tilt toward growth risks and easing bias weighs on EUR.
• What to watch: References to wage dynamics, services inflation, and fiscal stance.

Thu 21 Aug – PMIs

• Why it matters for FX: Broad-based improvement, especially in services and new orders, supports EUR; contractionary readings pressure EUR.
• What to watch: Divergences across Germany, France, Italy; prices charged vs. input costs.

Jackson Hole Watch List: What Would Move FX Most

• A clear nod to September cuts (Fed): Broad USD lower, risk on; EM FX and cyclicals benefit.
• Higher for longer pushback: USD higher, EUR/GBP soften; equities wobble; gold softens.
• Discussion of the neutral rate, higher perceived tighter stance for a given policy rate USD support.

Cross-Asset & Headline Pulse (last 3–4 days)

• FX (USD): Dollar broadly steady into Ukraine talks and Jackson Hole; markets price elevated odds of a September cut, though momentum has moderated. Implication: two way USD risk near term.
• FTSE 100: Holding near record territory; sentiment guided by global rate cut expectations and geopolitics.
• Gold: Rebounded from recent lows as U.S. yields eased; safe haven bid persists amid political headlines.
• Bitcoin: Printed fresh record highs late last week; institutional participation remains a key tailwind.
• Oil (Brent/WTI): Stable to slightly softer as Russian supply fears eased post high-level talks; headline-sensitive path this week.
• Global Equities: Tech-led resilience in the U.S.; European bourses range-bound awaiting policy signals.

Strategy Considerations (Deliverable Hedging & Risk Management)

• GBP exposures: Favour tactically buying dips if CPI/retail surprise to the upside; fade strength if PMIs roll over.
• EUR exposures: Maintain optionality into Lagarde/PMIs; skew risk reversals to benefit from potential hawkish surprise.
• USD exposures: For USD receivers, consider partial pre hedging before Powell; retain flexibility to add if he leans dovish.

This week could set the tone for the months ahead. Let’s make sure your strategy is aligned. Contact us at Currency Global on +44 (0)20 3876 5432 or [email protected].