Sterling Holds Gains as German GDP Beats Forecasts | US PCE Inflation and Jackson Hole in Focus

Key Highlight

• GBP: Sterling remains supported after four consecutive weeks of gains against the dollar, although it eased slightly yesterday.
• EUR: Stronger than expected German GDP, driven by improved exports, provided support for the euro.
• USD: The dollar remains under pressure as markets await Wednesday’s US PCE inflation data and Friday’s Jackson Hole speech from the newly appointed Fed Chair.

Market Recap

Currency markets were relatively subdued yesterday following the dollar’s sharp losses last week. Sterling slipped marginally against the US dollar but continues to hold onto its recent gains.

The US Treasury’s decision to double its long-term bond buybacks continued to weigh on the dollar, although the move has helped stabilise Treasury yields.

The Canadian dollar was the weakest major currency after President Trump announced a 50% tariff on $20 billion of Canadian goods.

Oil prices also moved lower as markets waited for further details on proposed US economic sanctions.

In Europe, German GDP surprised to the upside, supported by stronger exports, providing a positive signal for the eurozone’s largest economy.

Market Overview

Attention is now turning towards the US, particularly Wednesday’s PCE inflation figures, the Federal Reserve’s preferred measure of inflation. Markets will also be watching Friday’s Jackson Hole Symposium, where the newly appointed Fed Chair is scheduled to deliver a keynote speech.

The US Treasury’s latest bond buying plans remain a key market theme. CNBC reported that the Treasury is considering using its Treasury General Account, which currently holds almost $1 trillion, to help fund its purchases of longer dated US government bonds.

Markets had initially expected the programme to be financed through additional short term Treasury issuance. However, Treasury officials have indicated that the TGA could also be used, potentially providing greater scope for the buyback programme.

With US government debt now exceeding $40 trillion, the potential use of the TGA could help address concerns that the current buyback programme may not be large enough to have a meaningful impact on longer term yields.

For currency markets, the focus remains firmly on US inflation, Treasury policy and Friday’s Jackson Hole speech, with these developments likely to influence expectations for the Federal Reserve and the direction of the dollar.

25th August  2026

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