By James Caley
Sterling spent much of the week under pressure after UK inflation figures came in softer than markets expected. The data revived expectations that the Bank of England may have to ease sooner than previously thought, and that shift in rate sentiment has been the dominant driver behind GBP weakness. Markets have also been cautious ahead of next week’s Autumn Budget, where borrowing projections will be under close scrutiny.
The Dollar has held the upper hand throughout the week, supported by firmer US labour indicators and reduced expectations for near-term Fed cuts. This has kept most major currencies on the back foot, with the Euro also softening after cautious ECB commentary signalled little appetite for policy adjustments, unless the economic outlook deteriorates further.
This morning, attention turns to the UK’s latest economic activity and real-time indicators at 9:30am. After the softer inflation numbers earlier in the week, markets will be looking for any signs of stabilisation in underlying momentum. Stronger readings could help Sterling recover some ground, while weaker figures would reinforce expectations of earlier BoE easing.
This afternoon, the focus will shift to US weekly jobless claims — the key release for global FX sentiment today. Claims have been relatively steady, but any improvement would support the narrative of a still-resilient US labour market and could underpin further Dollar strength. A softer print may offer a brief lift to risk-sensitive currencies after a challenging week. As the day unfolds, the tone for markets will largely be shaped by the UK data at 09:30 and US jobless claims at 13:30, with any central-bank commentary or budget-related headlines adding to intraday volatility. These releases will determine whether this week’s pattern of softer UK data and firmer US momentum continues into the weekend.