Weekly Market Briefing - 28th August 2026

Markets were shaped this week by sticky US inflation, Federal Reserve Chair Kevin Warsh’s Jackson Hole speech, shifting rate expectations, renewed yen weakness and continued focus on energy-driven inflation risks. 

The US dollar strengthened into the end of the week after July PCE inflation came in slightly hotter than expected and Warsh signalled that the Fed still had “work to do” if inflation failed to cool convincingly. 

Sterling recorded its first weekly decline against the dollar in more than a month as expectations for a Bank of England rate hike this year were pared back.

The euro also weakened against the dollar as markets looked ahead to September’s ECB meeting, where a rate rise is still widely expected but may not be accompanied by aggressive forward guidance. The yen remained under pressure near intervention-sensitive levels, despite growing expectations that the Bank of Japan could raise rates again in September.

Geopolitically, markets remained focused on the US-Iran conflict, the impact of elevated energy prices on inflation and the broader concern that central banks may need to keep policy tighter for longer. Investors now move into September facing a dense calendar of US jobs data, eurozone inflation, global PMI releases and further central bank commentary.

Data/Figures

Federal Reserve - USD

The US dollar strengthened this week, supported by sticky inflation data and a more hawkish interpretation of Warsh’s Jackson Hole speech.

The Fed held rates at 3.50%–3.75% at its July meeting, but the market increasingly treated that hold as temporary rather than a sign that the tightening cycle is complete. July PCE inflation came in at 3.7% year-on-year, unchanged from June and slightly above market expectations. 

The monthly PCE increase was 0.2%, following a 0.1% decline in June. This suggested that the disinflation process remains uneven and gave investors less reason to expect the Fed to remain patient indefinitely.

Warsh’s Jackson Hole comments added to the dollar’s support. His statement that the Fed would still have “work to do” if underlying inflation failed to return toward target pushed September hike expectations higher. Markets interpreted the speech as the clearest signal yet that the Fed could tighten again if upcoming data does not improve. 

The dollar index rose sharply on Friday and was on track for its strongest weekly gain in several weeks. It gained roughly 0.7%–0.9% over the week, while the euro and sterling both weakened against the dollar.

Asset Manager / Institutional positioning was still positive but softened during the latest CFTC reporting week. The latest CFTC Traders in Financial Futures data, covering positions as of 25 August, showed USD Index Asset Manager accounts holding 15,863 long contracts and 1,845 short contracts, leaving a net long position of +14,018 contracts. The net position fell by 980 contracts versus the previous week, as long positions declined by 929 contracts while short positions increased by 51. 

This suggests that institutional accounts remained net long USD, but reduced conviction ahead of Warsh’s Jackson Hole speech. Price action after the speech then moved back in the dollar’s favour.

Market Impact: Stronger on the week, supported by sticky inflation, hawkish Fed commentary and higher September hike expectations, although Asset Manager positioning softened before the late-week dollar rally. 

Bank of Japan - JPY

The yen remained weak and intervention-sensitive this week. USD/JPY moved back toward the 160 level, a threshold markets associate with increased intervention risk, especially after the rare joint Japan-US intervention earlier in August.

The Bank of Japan kept policy steady at its July meeting after raising its policy-rate guideline to around 1.00% in June. However, markets increasingly expect the BoJ to raise rates again in September, with economists now seeing a stronger chance that the central bank accelerates its tightening path. 

Tokyo core CPI rose 1.8% year-on-year in August, up from 1.7% in July and above expectations. This was important because Tokyo inflation is treated as a leading indicator for national inflation. 

The rise suggests that price pressures are broadening, partly due to higher costs linked to the Middle East conflict, yen weakness and stronger wholesale inflation. Despite that, the yen remained under pressure because the US-Japan rate gap is still wide. Even if the BoJ raises rates to 1.25% in September, Japanese rates would remain far below US rates. 

This leaves the yen exposed to carry trades, where investors borrow in yen and invest in higher-yielding currencies. Japanese authorities also remained active in the background. Finance Ministry data showed that Japan spent a record amount supporting the yen over the past month, but the currency’s renewed weakness shows that intervention alone has not changed the broader rate-differential story. 

Asset Manager / Institutional positioning became less bearish, which is a small positive for the yen. The latest CFTC data showed JPY Asset Manager accounts holding 71,421 long contracts and 91,537 short contracts as of 25 August, leaving a net short position of -20,116 contracts. The net position improved by 5,627 contracts versus the previous week.

Long positions fell slightly by 408 contracts, but short positions fell much more sharply by 6,035 contracts. This shows that institutional accounts reduced bearish yen exposure, even though the currency itself remained under pressure.

Market Impact: Still weak and intervention-sensitive, with rate differentials and carry pressure dominating. However, COT data showed a reduction in institutional yen shorts, suggesting bearish positioning became less extreme.

Bank of England - GBP

Sterling weakened this week and was headed for its first weekly decline against the dollar in more than a month. The move reflected both broad dollar strength and a decline in expectations for a near-term Bank of England rate hike. 

The Bank of England held Bank Rate at 3.75% at its July meeting. Earlier in August, sterling had been supported by expectations that persistent inflation could force the BoE to raise rates again this year. However, those expectations softened during the week. 

Market pricing showed around 25bp of hikes priced by December, down from around 30bp more than a week earlier, and investors no longer fully price a quarter-point hike until early 2027. This shift weighed on sterling, particularly as the US dollar strengthened after the hotter PCE data and Warsh’s Jackson Hole speech. 

GBP/USD slipped toward the $1.36 area and lost momentum after trading near multi-month highs earlier in August. The UK backdrop remains mixed. Inflation risks have not disappeared, especially given energy-price uncertainty, but investors appear more cautious about how much additional tightening the BoE can deliver without damaging growth. 

The BoE is therefore still viewed as hawkish, but less aggressively so than earlier in the month. Asset Manager / Institutional positioning improved significantly, despite the weaker spot move. The latest CFTC data showed GBP Asset Manager accounts holding 45,799 long contracts and 150,290 short contracts as of 25 August, leaving a net short position of -104,491 contracts.

The net position improved by 12,749 contracts versus the previous week. This was driven by a large 12,283-contract increase in long positions and a 466-contract decline in shorts. Asset Managers therefore remained heavily net short sterling, but the bearish position became less extreme.

Market Impact: Weaker on the week as BoE hike expectations were pared back and the dollar strengthened. However, institutional positioning improved, suggesting some longer-term bearish sterling exposure was being reduced.

European Central Bank - EUR

The euro weakened against the dollar this week as the greenback strengthened into Friday. EUR/USD slipped toward the mid-$1.16 area ahead of Warsh’s speech and fell further after markets interpreted his comments as hawkish.

The ECB held rates unchanged at its July meeting, leaving the deposit rate at 2.25%, the main refinancing rate at 2.40% and the marginal lending facility at 2.65%. However, September remains firmly in focus. ECB accounts and subsequent reporting suggest policymakers still see another rate hike as likely unless the inflation outlook improves materially.

The key issue for the ECB is energy. Eurozone August inflation is expected to rise again, with forecasts pointing to a move back above 3% as higher fuel costs feed through. That would keep pressure on the ECB to act at its September meeting, even though policymakers may be reluctant to signal an extended tightening cycle beyond that.

The euro’s weakness this week was therefore more about dollar strength than a major deterioration in the eurozone outlook. The ECB remains one of the more likely major central banks to tighten in September, but the dollar benefited more directly from sticky US inflation and Warsh’s Jackson Hole comments.

Asset Manager / Institutional positioning strengthened in favour of the euro. The latest CFTC data showed EUR Asset Manager accounts holding 461,805 long contracts and 200,379 short contracts as of 25 August, leaving a net long position of +261,426 contracts.

The net position increased by 24,000 contracts versus the previous week. Long positions rose by 10,230 contracts, while short positions fell by 13,770. This shows that institutional conviction toward the euro improved, even though EUR/USD weakened against a broadly stronger dollar.

Market Impact: Weaker against the dollar due to renewed USD strength, but still supported by positive institutional positioning and expectations that the ECB may raise rates again in September.

Currency Market Summary

The main FX theme this week was renewed dollar strength. The dollar index rose sharply after Warsh’s Jackson Hole speech and was on track for its strongest weekly gain in several weeks. 

Sticky US inflation and higher Fed hike expectations were the main drivers. EUR/USD weakened as the dollar strengthened, with the pair falling after several weeks of euro gains. 

The euro remains supported by expectations for a September ECB hike, but that was not enough to offset Friday’s dollar rally. GBP/USD recorded its first weekly decline in more than a month. 

Sterling had been one of the stronger developed-market currencies earlier in August, but softer BoE hike pricing and stronger USD momentum weighed on the pair. 

USD/JPY moved back toward 160, keeping intervention risk in focus. Tokyo inflation data strengthened the case for another BoJ hike, but the yen remained vulnerable because the US-Japan rate gap continues to dominate. 

Overall, the week’s positioning data shows a slightly more nuanced picture than spot FX. Asset Managers reduced net long USD exposure before the late-week rally, increased net long EUR exposure, reduced net short GBP exposure and reduced net short JPY exposure. In price terms, however, the dollar still finished as the strongest major story because Warsh’s speech and sticky inflation shifted Fed expectations late in the week.

What to Watch Next Week

Markets will be watching several high-impact economic and geopolitical events next week: 

• US Non-Farm Payrolls: The key event of the week. Markets will watch whether August hiring is strong enough to support Warsh’s hawkish Jackson Hole message and keep a September Fed hike in play.

• US JOLTS / ADP / Jobless Claims: Labour-market data through the week will be important for judging whether the Fed can tighten again without risking a sharper slowdown.

• US ISM Manufacturing and Services PMIs: These will give a clearer read on whether US activity remains resilient despite higher rates and inflation pressure.

• Eurozone August Inflation: A major focus for the ECB. A move back above 3% would reinforce expectations for a September rate hike.

• Bank of England Lending and UK Shop Price Data: These will help show whether higher rates and inflation are cooling household demand.

• Japan Data and BoJ Commentary: Markets will focus on any further signals around a possible September BoJ rate hike, especially after stronger Tokyo inflation and renewed yen weakness.

• US-Iran / Energy Market Developments: Any renewed escalation or disruption to shipping routes could quickly lift energy prices, inflation expectations and bond yields.

• G20 Meetings: Central bank and finance-ministry comments from the G20 meetings may influence expectations for policy coordination, FX intervention and global financial stability.

Summary

Markets ended the week with a clear shift back toward dollar strength. Sticky US inflation and Warsh’s Jackson Hole speech pushed investors to increase expectations of a September Fed hike, supporting the dollar and lifting short-dated Treasury yields.

Sterling weakened as Bank of England hike expectations were pushed further out, although Asset Manager positioning showed that institutional bearishness toward the pound became less extreme. The euro also weakened against the dollar, but institutional positioning toward EUR improved and September ECB hike expectations remained in place. 

The yen stayed vulnerable near intervention-sensitive levels, with rate differentials still dominating despite stronger Tokyo inflation and reduced institutional short positioning.

Looking ahead, the focus turns to US jobs data, eurozone inflation, global PMIs, BoJ commentary and geopolitical developments around energy markets. These will determine whether the late-week move toward dollar strength and higher rate expectations continues into September.