The FX market heads into September focused on three major central‑bank decisions falling within eight days. Between 10 and 17 September, the ECB, the Fed and the BoE will each meet, putting monetary policy back at the centre of currency markets.
Another hike is expected in Europe, the UK is weighing whether to hold and the US is coming off a sharp repricing of rate expectations. After a month in which softer US data helped push the dollar lower, September could test how durable that shift really is.
EUR is the strongest of the three on the relative interest-rate outlook, GBP is more balanced and data-dependent, while USD carries the widest range of outcomes.
-Jamie Jemmeson, Head of Options Product
August in focus
- Sterling rose to a six‑month high near $1.366 as better‑than‑expected UK GDP and sticky inflation supported the pound.
- The euro gained around 1.3% against the dollar in early August, helped by resilient eurozone data and a weaker dollar.
- The dollar index fell to around 98.6 by mid‑August after weak US retail sales and a July payrolls miss prompted markets to reassess the US rate outlook.
What it means for you: a weaker dollar makes US imports pricier for European buyers but is good news for exporters selling into the US. A stronger pound helps UK businesses with overseas supply chains, but could squeeze UK exporters competing on price.
The pound
Sterling enters September with the BoE facing a familiar dilemma: inflation remains elevated, while signs of weaker growth make further rate rises harder to justify. Markets expect rates to remain unchanged on 17 September, but July’s 6–3 vote leaves another hike in play.
The inflation and growth data ahead of the meeting will shape how that vote is interpreted. Persistent price pressures could keep the prospect of another increase alive, while weaker growth would make a prolonged period of restrictive rates harder to sustain. A hold with a firm inflation message could still support sterling.
The Autumn Budget is another potential pressure point, particularly if higher spending raises concerns about borrowing and the new government’s limited fiscal headroom.
If you’re paying in GBP: a move in sterling could quickly change the cost of upcoming invoices against the budget rate set for them.
The euro
The ECB delivered its first hike since 2023 in June and a follow-up hike in September is now around 90% priced in, so much of that move is already reflected in the euro.
-Jamie Jemmeson, Head of Options Product
The euro remains the best supported of the three currencies on the relative interest-rate outlook, but whether September is a one-and-done move is less clear.
Energy prices and any escalation in Middle East tensions are wildcards that could hurt the euro. A sustained rise could keep inflation elevated and strengthen the case for higher rates for longer, while also putting pressure on European growth.
If the ECB instead signals that September marks the end of the tightening cycle, the euro could struggle to extend its recent gains.
If you’re paying in EUR: watch whether the euro holds its recent strength after the ECB decision.
The dollar
The dollar is September’s main swing factor. A Fed hold is now widely expected, putting more focus on US inflation and employment data for clues about what comes next.
The main risk is the Fed meeting. There’s uncertainty around New Chair Kevin Warsh’s evolving communication framework. He’s argued for reducing reliance on forward guidance, encouraging investors to focus on economic data and fundamentals rather than central bank guidance. As a result, communication from the FOMC may not be as forthcoming as it has been previously.
-Jamie Jemmeson, Head of Options Product
Meanwhile, Treasury Secretary Scott Bessent’s push to increase long-dated bond buybacks has added another source of uncertainty around US borrowing costs.
Stronger CPI and jobs data could revive expectations of tighter monetary policy and support the dollar, while weaker data would leave it under pressure.
If you’re paying in USD: the dollar has more two-way risk this month than either sterling or the euro.
The takeaway?
September brings several potential sources of FX volatility at once, from central-bank decisions and US rate expectations to energy prices, UK fiscal policy and geopolitical risk. The outcomes aren’t forecastable, but your exposure to them is measurable.
If your business trades across GBP, EUR or USD, talk to your Lumon FX specialist about your exposure to these events.
This publication is provided for general information purposes and does not constitute legal, tax or other professional advice from Lumon or its subsidiaries, and it is not intended as a substitute for obtaining advice from the relevant professional services. We make no representations, warranties or guarantees, whether expressed or implied, that the content in the publication is accurate, complete or up to date.
