US Inflation Data Set to Drive GBP, EUR and USD Exchange Rates Today | FX Market Update 12 August 2026

Key Highlight

• US inflation is the main market event today. The 1:30pm BST CPI release is likely to determine the direction of the dollar across the major currency pairs, with expectations for a September Fed rate cut currently close to 50/50.

• Dollar yen remains under pressure from intervention concerns. The pair is moving closer to levels where Japanese authorities could become more active, while disagreements between US and Japanese officials over the pace of Bank of Japan tightening are adding further uncertainty.

• Sterling is benefiting from higher oil prices. Oil has risen around 1% to approximately $89.80 as hopes of a US Iran agreement to reopen the Strait of Hormuz fade. This is broadly supportive of sterling against commodity linked and oil importing currencies.

• The New Zealand dollar has been the weakest G10 currency overnight. Prime Minister Christopher Luxon survived an emergency confidence vote intended to address leadership speculation, but the New Zealand dollar has yet to recover its losses.

Market Recap

The dollar remains supported by elevated oil prices and a tougher US stance towards Iran, although it is trading close to a two-month low. With markets almost evenly split on the prospect of a September Fed rate cut, today's inflation data has become particularly important for the next move in the dollar.

The euro has struggled to build momentum as higher energy prices create a difficult stagflationary backdrop. Rising oil prices could encourage the ECB to maintain a tighter policy stance, but the resulting pressure on growth in an energy dependent eurozone is limiting the benefit to the currency.

The Australian dollar weakened after the RBA left interest rates unchanged but adopted a more cautious tone. Governor Michele Bullock highlighted expectations for higher unemployment and lowered the central bank's inflation forecasts, reducing expectations for further tightening.

Oil continued its recent advance, rising around 1% to approximately $89.80. The move reflects diminishing expectations of a US Iran agreement that would allow the Strait of Hormuz to reopen, keeping energy markets firmly in focus.

The New Zealand dollar recorded the largest decline among the G10 currencies overnight. Although Prime Minister Luxon won the emergency caucus confidence vote, the political uncertainty continued to weigh on the currency.

Market Overview

Dollar Holds Near Two Month Low Ahead of US Inflation Data

Today's 1:30pm BST US inflation release is the key event for currency markets. The dollar's limited movement overnight reflects the uncertainty surrounding the data, with markets currently pricing the probability of a September Fed rate cut at close to 50%.

Euro vs Dollar

Near term: 50% conviction, mixed

EUR/USD remains caught between its 50 day and 200 day moving averages, with the pair edging lower overnight as the dollar showed modest resilience. Today's CPI figure is likely to determine the next significant move. A softer inflation reading could support a recovery towards the June highs, while a stronger figure could push the pair back towards the July lows.

The euro also faces a longer-term challenge from stagflation. Expectations of an ECB rate increase provide some support, but weaker eurozone growth and reduced bullish positioning are limiting the upside.

Medium term: 50% conviction, mixed

The outlook remains finely balanced. An expected September ECB hike is supportive for the euro but concerns over eurozone growth and a reduction in bullish euro positions provide meaningful counterweights.

For a €250,000 transaction, a move towards resistance would increase the cost for dollar buyers by approximately $1,625, while a move towards support would increase the cost for sellers by approximately $4,050.

Pound vs Dollar

Near term: 50% conviction, mildly higher and range bound

GBP/USD remains above both its 50 day and 200 day moving averages, although trading has been subdued ahead of the US inflation figures. The CPI release is now the dominant short term catalyst for the pair.

Medium term: 60% conviction, pound strength

The broader outlook remains favourable for sterling, with narrowing US to G10 interest rate differentials supporting the pound as expectations for lower US rates increase. However, Sterling’s relatively strong valuation could limit the extent of any further gains.

For a £250,000 transaction, reaching resistance would reduce the cost for dollar buyers by approximately £433, while a move towards support would increase the cost by approximately £452.

Pound vs Euro

Near term: 60% conviction, slight pound bias

GBP/EUR remains largely range bound after breaking above its July downtrend. The pair edged slightly higher overnight but remains below its 20-day average. Continued resilience in UK economic data without a significant deterioration in growth would provide further support for sterling.

Medium term: 40% conviction, pound strength

The broader trend remains higher, although further gains are expected to be gradual and uneven. Falling US yields and narrowing interest rate differentials are supportive of the euro more broadly, which could limit sterling's upside against the single currency.

For a £250,000 transaction, a move towards resistance would reduce the cost for euro buyers by approximately £2,371, while a move towards support would increase the cost by approximately £1,155.

Bottom Line

US inflation at 1:30pm BST is the defining event for currency markets today. With expectations for a September Fed rate cut almost evenly balanced, the CPI figure could provide the catalyst for the dollar to break out of its recent range. Sterling remains comparatively well positioned, while the euro faces stagflation concerns and the New Zealand dollar continues to feel the effects of domestic political uncertainty.

12th August  2026

This document has been prepared solely for information and is not intended as an Inducement concerning the purchase or sale of any financial instrument. By its nature market analysis represents the personal view of the author and no warranty can be, or is, offered as to the accuracy of any such analysis, or that predictions provided in any such analysis will prove to be correct. Should you rely on any analysis, information, or report provided as part of the Service it does so entirely at its own risk, and Frank eXchange Limited accepts no responsibility or liability for any loss or damage you may suffer as a result.  Information and opinions have been obtained from sources believed to be reliable, but no representation is made as to their accuracy. No copy of this document can be taken without prior written permission.