USD closed the week firm, supported by cautious but consistent Fed rhetoric. Powell stuck to his "data-dependent, inflation-wary" script, pushing back against premature cut bets. With next week’s FOMC looming, traders squared up.
GBP extended its recent slide after another soft data print, this time in retail sales. Slowing consumer demand is feeding the BoE rate cut narrative, with divergence vs Fed policy growing.
EUR outperformed, benefiting from a slightly less dovish tone out of the ECB. Policymakers are hinting that the end of the cutting cycle may be near. This has helped the euro's position and supported euro crosses heading into the weekend.
*Daily move - against G10 rates at 7:00 am, 28.07.25
** Indicative rates - interbank rates at 7:00 am, 28.07.25
Markets are risk-on this morning after the US and EU reached an agreement on most European goods, including cars. According to the agreement, goods entering the US will face a 15% tariff. Initially, the EUR gained off the move but the gains were not sustained. USD has opened up higher across the board.
This is a big week for FX. With the FOMC, Eurozone CPI, and US payrolls all landing. Expect volatility, if any of the major prints surprise. The Fed remains the anchor. Markets are expecting a steady hand, but the tone matters. If Powell leans hawkish and signals September is still live, USD could extend gains - especially if payrolls surprise to the upside.
EUR is quietly building momentum, supported by growing signs the ECB may be near the end of its rate cutting cycle. GDP on Wednesday is expected to show growth at 0% in Q2, down from 0.6% in Q1. Friday's CPI numbers are expected to show CPI easing to 1.9% year on year.
GBP looks vulnerable, with weak macro signals and dovish repricing around the BoE. Unless the data surprises, GBP risks more downside versus both USD and EUR.
The week ahead has all the ingredients to cause a stir: a critical Fed decision, inflation out of Europe, and a job market check for the US. EUR strength is being quietly underwritten by ECB pause chatter, while USD still holds the upper hand into event risk. GBP sits in the crosshairs, lacking support from either data or central bank signals. Positioning is light enough across the majors to allow for breakout moves, especially if the Fed delivers something markets aren’t ready for.
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