Monthly Currency Report Summary – August 2026
Overview
August 2026 was a month of consolidation, shifting rate expectations and continued headline risk from the Middle East. After the volatility seen in June and July, markets entered August with traders still focused on the interaction between geopolitical risk, oil prices, inflation expectations and central bank policy. The US Dollar remained highly sensitive to developments around Iran and the Strait of Hormuz, while Sterling and the Euro moved in response to shifting expectations around the Bank of England, the Federal Reserve and the European Central Bank.
GBP/USD began August close to 1.3500 but struggled to break above that level. The Bank of England’s message that interest rate hikes were unlikely limited Sterling’s upside, while renewed Greenback demand kept pressure on the pair during the first week. However, the broader trend improved through the middle of the month. Softer US data, weaker expectations for Fed tightening and stronger UK inflation figures helped Cable recover back above 1.3500 and later toward 1.3600. By month-end, the pair remained supported around 1.3600, although upside was capped by profit-taking, safe-haven Dollar demand and caution ahead of US employment data.
EUR/USD also had an uneven month. The pair began August near 1.1500 and struggled to build a sustained move above 1.1550. Middle East uncertainty and Dollar safe-haven demand limited Euro gains, although the pair showed resilience when Greenback demand softened. In the second half of the month, EUR/USD improved as the Dollar sold off and the pair retook the 200-day moving average. It moved above 1.1600 and later approached 1.1700 before retreating slightly as central bank narratives from Jackson Hole encouraged some profit-taking. By the end of the month, EUR/USD remained above 1.1500 but had lost some of its earlier momentum.
GBP/EUR spent August in a relatively narrow but important range. The pair started below 1.1700, with traders looking for a bandwidth between 1.1650 and 1.1700. As the month progressed, the cross pushed back above 1.1700, supported by Sterling resilience and periods of Euro weakness. However, when EUR/USD rallied more strongly than GBP/USD, GBP/EUR came under pressure and fell back toward the mid-1.16s. By month-end, the pair recovered toward 1.1680 but remained below the highs seen earlier in the summer.
Overall, August was not a month of clean directional trends. Instead, it was a period of testing and consolidation. Markets reacted to data, but they remained highly exposed to headlines from the Middle East and to central bank commentary, particularly from Jackson Hole.
GBP/USD Performance
GBP/USD began August under pressure after failing to hold the 200-day moving average. On 3 August, the pair traded from the back foot around 1.3460 as traders tested whether 1.3500 would act as a barrier once again. The Bank of England had made clear that interest rate hikes were unlikely in the near term, which reduced Sterling’s policy support. At the same time, falling oil prices and Trump’s decision to call off attacks on Iran changed risk sentiment and created uncertainty around the Dollar’s direction.
The early part of the month remained choppy. On 4 August, Cable fell almost 0.5% and again failed to hold the 200-day moving average. Sterling was weighed down by Andrew Bailey’s tone on interest rates, while Greenback demand recovered after an uncertain start to renewed peace talks. On 5 August, the pair tried to rebuild momentum around 1.3460, although upside was expected to be capped near 1.3500. Renewed threats from Trump toward Tehran and the closure of the Strait of Hormuz supported Dollar haven demand, keeping Sterling gains limited.
By 6 August, GBP/USD was again pushing toward 1.3500, but traders were cautious ahead of US employment data and further Middle East headlines. The pair was close to overbought levels from a technical perspective, meaning that even when Sterling recovered, traders were reluctant to chase the move much higher. Holding above the 200-day moving average remained the key objective.
The middle of the month brought a stronger tone for Cable. On 11 August, GBP/USD pushed above 1.3500 and traded firmly above mid and long-term trend indicators. The move was helped by expectations that US inflation would remain around 2.5%, which reduced the case for further Fed tightening. On 12 August, the pair held its bullish tilt ahead of US CPI, although resistance from May and stretched technical conditions suggested 1.3600 could remain difficult to reach.
US CPI at 2.5% helped Cable push toward 1.3550, although the pair traded from the back foot on 13 August despite better-than-expected UK monthly GDP growth. Poor UK factory output data limited Sterling confidence. On 14 August, GBP/USD recovered above 1.3500 after weaker US consumer and producer price data reduced expectations of Fed hikes. This helped shift the Q3 policy outlook more in Sterling’s favour.
The strongest part of the month came from 17 August onward. GBP/USD climbed above July’s resistance levels after disappointing US retail data weakened the Dollar. Traders then looked to UK employment and inflation data for confirmation of the Bank of England’s likely September stance. The pair reached highs of 1.3571 on 18 August before pulling back to around 1.3525 after weak UK jobs data. However, the following day, annualised UK CPI held at 2.9%, supporting Sterling purchases and reinforcing the view that the BoE could remain hawkish.
On 20 August, Cable moved above 1.3600 after the US session brought additional liquidity and Sterling demand improved. The pair then traded around 1.3610, although upper RSI limits suggested further gains would be slow. Fed bond buybacks also became an important market theme, as traders assessed how US policy support in fixed-income markets might affect the Dollar.
The final week saw the pair consolidate around the 1.3600 area. GBP/USD peaked at 1.3676 on 22 August before easing back toward 1.3630 as sanctions on Iran and renewed geopolitical caution supported the Dollar. Ahead of Jackson Hole, traders expected softer Fed messaging, but remained wary of risk aversion. On 27 August, Cable slipped to 1.3590, the first time since 19 August, before stabilising around 1.3600 by 28 August. The month ended with a bullish bias intact, but with further upside capped by profit-taking, safe-haven Dollar demand and uncertainty ahead of US employment data.
EUR/USD Performance
EUR/USD began August close to 1.1500, with the pair struggling to hold gains from late July. On 3 August, the pair failed to capitalise on 1.1550 and moved back toward 1.1500. Trump’s decision to call off attacks on Iran, falling commodity prices and uncertainty around peace talks weighed on the Euro’s performance. With limited Eurozone data, traders relied heavily on Middle East headlines and Dollar sentiment.
The pair remained resilient around 1.1500 on 4 August, even after a revival in Greenback demand. Traders saw the level as important support and believed EUR/USD could capitalise on any easing of geopolitical tensions. On 5 August, the pair aimed to recover toward 1.1550 after retracing part of Monday’s losses. Hopes of de-escalation in Iran undermined the Dollar, but uncertainty around the Strait of Hormuz kept traders cautious.
By 6 August, EUR/USD was again testing resistance around 1.1550. The pair had recovered from earlier downside but remained vulnerable to US employment data and renewed geopolitical risk. This pattern continued through the first half of the month. On 11 August, EUR/USD opened in the red for a third consecutive day as Greenback demand prevented a sustained break above 1.1550. On 12 August, the pair opened in the red for a fourth day but stayed above 1.1500, with traders awaiting US CPI and German HICP data.
The Euro struggled on 13 August after failing to hold above 1.1500. Eurozone data, especially from Germany, underwhelmed traders. Even though US CPI created optimism around a softer Fed outlook, market participants remained cautious about selling the Dollar while geopolitical uncertainty persisted. On 14 August, EUR/USD recovered toward 1.1550, supported by weaker US price data, but the pair remained stuck within the same range seen for most of the first two weeks.
The second half of August was more constructive. On 17 August, EUR/USD moved above 1.1600 as the Dollar weakened following disappointing US retail data. The pair was operating near a two-month high, although technical indicators suggested it was approaching overbought conditions. On 18 August, EUR/USD reached 1.1614 before losing traction overnight as renewed Middle East risk supported the Dollar.
On 19 August, EUR/USD again traded from the front foot after German ZEW data came in better than expected. The pair looked to retest 1.1600 and focus shifted to the 200-day moving average. On 20 August, the Euro benefited from a broad Dollar decline and pushed toward 1.1700, trading around 1.1680 after retaking the 200-day moving average. Bulls then looked toward the next psychological marker, with limited technical resistance until around 1.1790. However, the pair was considered overbought after its sharp rise, limiting immediate upside.
The final week saw EUR/USD soften. On 24 August, the pair remained below 1.1700 and met resistance at the psychological level. On 25 August, it was suppressed toward 1.1650 as profit-taking emerged and sanctions on Iran kept traders cautious. Hawkish ECB expectations helped limit downside because oil price risks could force policymakers to remain alert to inflation. On 27 and 28 August, EUR/USD edged lower as central bank narratives from Jackson Hole became the key focus. By month-end, the pair remained above 1.1500 but was correcting back toward its 200-day moving average.
Overall, EUR/USD improved from early-month pressure around 1.1500, reached toward 1.1700 in the second half of the month, but failed to sustain a clear breakout. Dollar demand, Middle East uncertainty and profit-taking kept the pair within a wider 1.1500 to 1.1700 range.
GBP/EUR Performance
GBP/EUR entered August below 1.1700, with traders expecting the pair to move within a 1.1650 to 1.1700 range. On 3 and 4 August, the cross was held below 1.1700 as the 20-day moving average acted as resistance. Cable weakness was the main reason for early pressure, although EUR/USD was also struggling, which limited the downside.
On 5 August, GBP/EUR worked from 1.1660 and attempted to reclaim 1.1670. The pair remained resilient, but upside was capped ahead of Middle East announcements and the cross-market volatility that could follow. On 6 August, the pair looked to recover above 1.1660 after four consecutive days of losses, with traders focusing on risk sentiment and the relative performance of GBP/USD and EUR/USD.
By 11 August, GBP/EUR had moved back above 1.1700. The move was supported by a stronger Cable and a weaker Fibre, allowing the cross to retake the 20-day moving average. The pair remained above 1.1700 on 12 August as traders used Sterling’s relative strength and Euro weakness to maintain a positive bias. However, US data had the potential to create cross-market volatility.
The pair lost momentum in the middle of the month. On 13 August, GBP/EUR fell back toward the 20-day moving average as Sterling followed Cable lower. On 14 August, the cross slipped below 1.1700 as EUR/USD recovered more strongly than GBP/USD. On 17 August, despite gains in both GBP/USD and EUR/USD, GBP/EUR failed to hold above 1.1700 because the Euro strengthened faster than Sterling against the Dollar.
The lowest point of the month’s second-half correction came around 20 August, when GBP/EUR opened near 1.1650 after its largest daily loss since 18 June. EUR/USD had enjoyed windfall gains against the Dollar, which weighed on the cross. However, downside was expected to be limited because Sterling was close to oversold on volatility indicators.
The final week saw GBP/EUR attempt to rebuild. On 24 August, slowing Euro momentum helped the cross recover above 1.1650. On 25 August, a softer Fibre allowed GBP/EUR to push back toward 1.1700 and secure ground above the 20-day moving average. However, caution around Middle East headlines and expectations of ECB tightening limited enthusiasm.
On 27 August, GBP/EUR came under pressure again as Sterling fell more heavily than the Euro against the Dollar. The pair dropped below the 20-day moving average and tested support from early July. By 28 August, it was using support around 1.1670 and looking for stability into the final trading sessions. The month ended with GBP/EUR still below 1.1700, but not far from that level, with traders waiting for fresh data and central bank guidance.
Overall, GBP/EUR spent August in a controlled consolidation phase. The pair traded mostly between 1.1650 and 1.1700, briefly breaking higher when Sterling outperformed, but failing to hold gains when EUR/USD rallied more strongly. The cross remains sensitive to any change in BoE or ECB rate expectations.
Key Market Influences
The main influence in August was central bank policy expectations. The Bank of England’s tone reduced the likelihood of near-term rate hikes early in the month, but UK CPI at 2.9% later reinforced expectations that the Bank may remain cautious and relatively firm. The Fed’s outlook also shifted, as weaker US data reduced expectations of rate hikes, while Jackson Hole commentary became the main focus at month-end.
US data had a major impact. Softer US CPI, weaker consumer and producer price data and disappointing retail sales all helped reduce Fed hike expectations and supported GBP/USD and EUR/USD at different points. However, US employment data remained a key risk at month-end.
Middle East developments were another constant driver. The closure of the Strait of Hormuz, renewed attacks, sanctions on Iran and uncertainty around peace talks repeatedly supported safe-haven Dollar demand. This capped upside in both GBP/USD and EUR/USD.
Technical levels were also important. GBP/USD repeatedly reacted around 1.3500, 1.3600 and 1.3675. EUR/USD traded around 1.1500, 1.1550, 1.1600 and 1.1700. GBP/EUR remained focused on 1.1650, 1.1670 and 1.1700.
Outlook for September 2026
September begins with markets still focused on whether the BoE, Fed and ECB will maintain their current policy tone. For GBP/USD, holding above 1.3600 would support the view that Sterling has rebuilt momentum, but a break below 1.3500 would suggest the August recovery is fading. A move toward 1.3675 and beyond will likely require weaker US data or a more supportive BoE narrative.
For EUR/USD, the key level is 1.1500. If the pair remains above this level, it may attempt to rebuild toward 1.1700 again. If it falls below 1.1500, the market could retest lower support zones from July. ECB inflation concerns may provide some support, but Dollar demand will remain important.
For GBP/EUR, the 1.1650 to 1.1700 band remains the key area. A break above 1.1700 would suggest Sterling is regaining control, while a move below 1.1650 would point to renewed Euro outperformance.
Overall, August showed that FX markets remain reactive rather than firmly directional. September’s performance will depend on employment data, inflation readings, central bank commentary and whether Middle East tensions escalate or finally begin to ease.