Weekly Outlook · 26 July 2026

The Fed, Bank of England, and Bank of Japan all decide policy within days of each other as inflation data tests their next moves.

This week is defined by central bank meetings across three major economies and fresh inflation prints that will shape their decisions. The Fed meets with inflation cooling fast but labour still tight, the Bank of England faces a dovish shift as core inflation remains sticky, and the Bank of Japan continues its tightening cycle with inflation edging higher. Risk appetite is steady with equities mixed and volatility low, but oil has pulled back sharply. The macro pressure is squarely on monetary policy divergence and whether the data confirms or challenges current central bank stances.

What was driving markets

Fed holding hawkish while inflation cools

The Fed meets midweek holding rates elevated with inflation dropping sharply to target while the labour market remains tight. The combination of fast disinflation and resilient growth gives the Fed room to stay patient and keep cuts off the table. This hawkish hold with falling inflation is strongly supportive for the dollar, especially against currencies where central banks are closer to cutting.

Bank of England on the edge of a cut

The Bank of England decides policy after shifting dovish in recent weeks, with inflation cooling but core still sticky and the labour market tight. Growth is soft and retail sales have jumped, but the Bank appears ready to move soon if the data cooperates. A dovish tilt or an actual cut would weigh on the pound, particularly against the dollar and yen where policy is tightening or holding firm.

Japan pushing ahead with normalization

The Bank of Japan meets late in the week with inflation rising, wages growing, and a commitment to further hikes already signaled. The economy is steady with strong exports and a very tight labour market supporting the case for continued tightening. Expectations for more hikes keep the yen supported, especially as other major central banks hold or ease.

Inflation data will shape the narrative

Fresh inflation readings from the United States, Euro Area, and Australia land this week alongside the central bank decisions. The US core price index and Euro Area flash inflation will test whether disinflation continues, while Australia's trimmed mean inflation will show if the RBA's hawkish pause is justified. These prints matter because they either confirm or challenge the policy paths already priced in.

Antipodean currencies diverging on policy outlook

Australia and New Zealand are running hot with inflation well above target and central banks holding rates high or hiking further, but their currencies face different positioning pressures. The Aussie is supported by a hawkish RBA pause with more hikes possible, while the kiwi benefits from an active hiking cycle as inflation surges. Both benefit against the loonie and euro where policy is on hold with no urgency to tighten.

What was on the radar that week

• Fed decision and press conference. Watch for any shift in tone on the pace of disinflation or the timing of future cuts, though the hold is certain.
• Bank of England rate decision. A cut or a strong dovish signal would be a clear move and would weigh on sterling immediately.
• Bank of Japan meeting. Look for confirmation of further hikes and any update on the pace of tightening as inflation edges higher.
• US core PCE and GDP. The Fed's preferred inflation gauge and growth data will confirm or challenge the case for staying patient on cuts.
• Euro Area flash inflation and GDP. These prints will show whether sticky inflation persists and whether growth is stabilizing, shaping ECB expectations.

The bottom line

Three major central banks decide policy within hours of each other, and the data landing before and after will clarify whether the Fed can stay hawkish, the Bank of England will cut, and Japan will keep hiking. Focus on the divergence: hawkish central banks with falling inflation support their currencies, while those shifting dovish or stuck on hold face pressure.

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