Setting the Tone for Markets
The week of August 19–23, 2025, arrives at a delicate juncture for global markets. Last week ended with the dollar softening as traders positioned for Fed easing, while geopolitical uncertainty from Trump’s meetings with Putin and Zelenskiy clouded sentiment. Now, focus shifts to fresh economic prints and the Jackson Hole Symposium, with the potential to reset policy expectations. Currency pairs such as EUR/USD, GBP/USD, and USD/JPY are likely to be most volatile.
Tuesday – U.S. Housing Data as a Bellwether
The week begins in earnest on Tuesday with U.S. Building Permits and Housing Starts for July, projected at 1.393 million and 1.321 million respectively. Housing has acted as a sensitive gauge of policy transmission through higher mortgage rates. A strong rebound would suggest resilience in construction and could give the dollar an early boost, particularly against the euro and yen. Conversely, weakness would keep Fed cut expectations alive and weigh on USD performance.
Wednesday – Inflation Crosscurrents and Fed Minutes
Wednesday is packed with inflation updates from Europe and the UK. The UK’s Inflation Rate YoY is forecast to ease slightly to 3.6%. A downside miss would reinforce dovish BoE sentiment and limit sterling gains. If CPI surprises higher, GBP/USD could attempt to push through recent resistance near 1.36.
For the euro, the Eurozone CPI is expected to hold steady at 129.1. With markets already pricing in limited ECB scope to ease further, any weakness could be punished quickly.
Later in the day, the FOMC Minutes will take centre stage. Traders want clarity on whether July’s policy debates leaned more toward inflation caution or employment concerns. A minutes release that leans hawkish would support the USD, but an acknowledgment of rising labour-market slack would reinforce the odds of a September cut.
Thursday – PMIs and Labour Indicators
Thursday delivers a burst of flash PMI releases across Europe, the UK, and the U.S. The Eurozone’s services PMI is expected at 51.0 and manufacturing at 49.5. Readings above forecast would revive optimism for modest growth and provide support for the euro. In the UK, the services sector is forecast to remain in expansion at 51.8, while manufacturing remains under water at 48.0. Continued weakness here could restrain GBP, particularly if retail sentiment also fades.
In the U.S., Initial Jobless Claims are expected to tick up to 224k. Any sharp rise would highlight labour softening and keep rate-cut bets intact, but resilience would cushion the dollar. PMIs for the U.S. will also be closely watched, with modest growth expected to hold.
Thursday also marks the opening of the Jackson Hole Symposium. Early remarks from Fed officials could begin to shape market narratives ahead of Powell’s headline speech on Friday.
Friday – UK Consumer Pulse and Powell’s Test
Friday morning in Europe brings the UK’s Retail Sales report, forecast at 0.9% MoM and 1.7% YoY. After soft manufacturing readings, a beat here would be crucial to show that domestic demand remains solid, potentially lifting sterling. Weakness, however, would feed into stagflation concerns and add pressure to the pound.
The week’s climax comes later when Fed Chair Powell delivers his speech at Jackson Hole. The market is already pricing a September rate cut. A hawkish message, stressing inflation risks and patience, could trigger a USD rally, push USD/JPY back toward 149, and cap EUR/USD. A dovish emphasis on weakening labour markets and risks to growth could send the dollar sharply lower, supporting GBP and AUD.
Japan – Inflation’s Role in the Yen’s Fate
Friday also brings Japan’s Inflation Rate YoY, expected at 3.3%. The yen remains sensitive to yield differentials. A hotter-than-expected print could revive talk of another BoJ adjustment, providing yen support. A softer figure would reinforce the status quo and keep yen bears active.
What to Expect Overall
The dollar faces a tug-of-war between data suggesting resilience and expectations for imminent Fed easing. Europe and the UK battle with mixed inflation dynamics and weak growth, while Japan’s inflation print could either revive yen bulls or maintain the recent USD/JPY range. The Jackson Hole Symposium looms as the ultimate arbiter: Powell’s words could either validate market expectations for September easing or push back against them, unleashing sharp volatility across FX, bonds, and equities.
