Currency Markets Brace for U.S. Inflation Data Amid Fed Speculation

Currency markets are cautious ahead of U.S. inflation data, critical for Federal Reserve policy. Expectations of a rate cut could be solidified if inflation is moderate. Tariffs by President Trump could complicate Fed decisions. The Bank of England holds off on rate cuts following mixed UK jobs data.

Currency markets are poised for U.S. inflation data release, a key indicator for Federal Reserve policy shifts, toning down gains for the pound and losses for the Australian dollar. A moderate U.S. inflation reading could reinforce expectations of a Fed rate cut next month, heightened by recent soft payroll data.

President Trump's tariffs, if shown to stoke inflation, may pressure the Fed to hold rates, potentially sparking further conflict with Trump, who has advocated for rate cuts. Economists predict core CPI to rise 0.3% in July, with traders placing high odds on a rate cut in September.

As data time approaches, the dollar strengthens against the yen, while the euro and sterling experience minor shifts. UK's jobs data shows a slow weakening, prompting BoE caution. The Australian dollar dipped after a rate cut by the Reserve Bank over inflation and labor concerns.

(With inputs from agencies.)