Forex Weekly Outlook: Euro, Pound, Aussie, Yen and Gold React Ahead of Fed Decision

France showed a similar pattern, which has drawn heightened attention recently amid the country’s debt issues and mounting political turmoil: CPI held at 0.5% m/m and 0.8% y/y. Recall that former prime minister François Bayrou had pushed for sharp spending cuts, especially to social programs—moves heavily criticized by right-wing parties. Defense minister Sébastien Lecornu, nominated by Emmanuel Macron to form the new government, is expected to back higher taxes on corporations and high-income households. The euro also found some support after the ECB meeting yesterday: as expected, the Bank left the key policy rate unchanged at 2.15% and the deposit rate at 2.00%. The ECB has been steadily cutting since September 2024 and is now seen as nearly finished with its dovish cycle; at most, analysts pencil in one more 25 bp reduction this year. On the positive side, officials raised their 2025 growth forecast to 1.2% from 0.9%, trimmed 2026 to 1.0% from 1.2%, and kept 2027 at 1.3%. The U.S. dollar, meanwhile, responded on Thursday to CPI data that strengthened expectations the Fed will cut 25 bps on September 17. Core CPI rose 3.1% y/y in August, while headline accelerated as expected to 2.9% from 2.7%.

GBP/USD

The pound is slipping in GBP/USD during the morning session, pulling back from local highs and testing 1.3550 to the downside, with attention on U.K. data. As expected, July GDP slowed to 0.0% m/m from 0.4%, reflecting lingering uncertainty and trade restrictions. Output figures also disappointed: on a y/y basis, production eased to 0.1% versus 1.1% expected, while on a monthly basis it fell from 0.7% to −0.9%. At 10:30 (GMT+2), updated consumer inflation expectations will be released and could influence the Bank of England’s rate decision. Officials have previously stated they won’t wait for inflation to hit target given the economy’s fragile position, but they also don’t intend to move ahead of the Fed. The Fed is widely expected to cut 25 bps at its September 16–17 meeting; the BoE meets on September 18. In August, U.K. policymakers already trimmed the rate by 25 bps to 4.00%. U.S. data published yesterday had little impact on the pair: August CPI rose to 2.9% y/y as expected, with core steady at 3.1%. Initial jobless claims for the week ended September 5 rose to 263k (235k expected) and continuing claims printed 1.939 million (1.950 million expected).

AUD/USD

The Australian dollar is advancing in AUD/USD during the Asian session and is on track to end the week notably higher. The pair is holding near 0.6680—levels last seen in early November 2024. U.S. data yesterday broadly met forecasts, reinforcing expectations for a Fed rate cut on September 17. Core CPI rose 3.1% y/y in August, and headline quickened to 2.9% from 2.7% as anticipated. By contrast, U.S. producer inflation the day before surprised to the downside: core PPI slowed to 2.8% from 3.4% (3.5% expected) and headline to 2.6% from 3.1% (3.3% expected). According to CME Group’s FedWatch Tool, the odds of a September easing exceed 90%, so this outcome is largely priced. In Australia, the University of Melbourne’s September 12-month inflation expectations jumped from 3.9% to 4.7%, potentially adding pressure on the RBA to continue its dovish cycle. In August, the Bank cut rates for a third time this year to 3.60%, and governor Michele Bullock has flagged the need for further adjustments to achieve employment objectives.

USD/JPY

The U.S. dollar is firmer in USD/JPY in Asian trading, hovering near the week’s lows while testing 147.50 to the upside as markets prepare for the Fed decision on September 17. There is little doubt the Fed will cut 25 bps, marking the start of a new easing cycle. Notably, consumer inflation has not slowed as sharply as producer inflation, reinforcing the dovish tilt: core CPI rose 3.1% y/y in August, while headline accelerated to 2.9% from 2.7%; core PPI eased to 2.8% from 3.4% (3.5% expected) and headline to 2.6% from 3.1% (3.3% expected). Japanese investors are digesting July industrial production: −0.4% y/y after −0.9%, and +1.2% m/m versus 1.6% previously. Political tensions remain in focus following the resignation of Prime Minister Shigeru Ishiba, who took office only last October—a move seen as a response to the LDP’s defeat in July’s elections.

XAU/USD

XAU/USD is rising again, holding near record highs around 3675.00. Investors are maintaining long exposure as expectations of Fed easing next week are now widespread. Yesterday’s inflation data did not point to an upside surprise that might have argued for a slower pace of cuts later this year: core CPI rose 3.1% y/y in August and headline increased to 2.9% from 2.7% as expected. Core PPI fell to 2.8% from 3.4% (3.5% expected) and headline to 2.6% from 3.1% (3.3% expected). Initial jobless claims rose to 263k (235k expected), with continuing claims at 1.939 million (1.950 million expected). The U.S. fiscal balance for August also weighed on the dollar: the deficit widened to −$345.0 billion from −$291.0 billion, versus −$285.5 billion expected. Later today at 16:00 (GMT+2), markets will watch University of Michigan inflation expectations and the September consumer sentiment index, which is forecast to ease from 58.2 to 58.0.