The EUR/USD pair struggles to hold ground as markets cautiously await the European Central Bank (ECB) policy meeting. Recent US inflation numbers, including the headline annual and monthly statistics, as well as core CPI, have reinforced expectations of a 25 basis point Fed rate cut, creating volatility for the EUR/USD. Investors are keenly focused on ECB President Christine Lagarde's comments and updated economic projections, particularly regarding the feared Eurozone recession, which will likely determine the Euro's direction.

POUND DECLINES FOLLOWING DISAPPOINTING GDP RELEASE

Sterling lost ground against major peers following the latest UK GDP data. The UK economy remained stagnant in July, falling short of forecasts for a 0.2% expansion. British industrial production dropped by 0.8%, contrary to expectations of a 0.3% increase. Manufacturing production declined by 1% from a four-month peak, missing forecasts of a 0.2% rise. Despite the soft economic data, market sentiment is dangling on the Bank of England's upcoming monetary decision.

EURO STRUGGLES AHEAD OF ECB'S DECISION

The Euro struggles to gain momentum as the dollar strengthens, with traders hesitant to take significant positions ahead of the European Central Bank's (ECB) forthcoming interest rate decision. With a 25 basis point rate cut already baked in by the market, investors are looking for any new clues from ECB President Christine Lagarde's press conference for fresh guidance on the Euro's direction.

US DOLLAR BUOYED BY MARKET SENTIMENT

The dollar firmed following Wednesday's US consumer price index release. The US Core Consumer Price Index (CPI) rose 0.3% month-over-month, exceeding the previous month's 0.2% and market estimates. The data suggests that underlying inflation remains adherent, and hopes for a larger 50 bps rate cut by the Fed next week are inflated. Traders' observations for the latest US producer price index may influence the US dollar's trajectory.

CANADIAN DOLLAR STRENGTHENS BY A REBOUND IN OIL PRICES

The commodity-linked Canadian dollar is gaining ground, supported by a rebound in oil prices. Weaker-than-expected jobs data has bolstered expectations for additional interest rate cuts by the Bank of Canada, signalling caution among currency traders. As markets await monetary policy decisions from both central banks, the shift in crude oil prices and US inflation numbers are exerting downward pressure on the USD/CAD pair.

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