The pound-to-euro exchange rate fluctuated following the European Central Bank’s (ECB) widely anticipated decision to reduce interest rates. The euro's losses were constrained in the wake of the latest monetary policy meeting minutes. The GBP traded without a clear trajectory yesterday due to the absence of fresh UK economic data; however, rising public debt concerns may influence the GBP/EUR pair. The latest Eurozone industrial production figures and weaker-than-expected UK economic data could affect GBP/EUR in forthcoming trading sessions.

GBP/USD GAINS MOMENTUM AHEAD OF FED AND BOE MEETINGS

The GBP/USD pair has gained positive traction, trading around 1.3000, as the USD faltered on weaker-than-expected Producer Price Index (PPI) figures. US PPI increased by 0.2% month-on-month in August, while core PPI increased to 0.3%. Investors are likely to focus on annualised PPI inflation figures and the Fed's meeting next Wednesday, which will guide market sentiment. The publication of the latest US consumer sentiment index, due today, is expected to influence the dollar.

The slowing UK wage growth and flat July GDP have bolstered market mood for the Bank of England's (BoE) policy stance. The pound is likely to be influenced by the UK’s mid-tier Consumer Inflation Expectations and the crucial BoE meeting on Thursday. The central bank's monetary policies will determine the direction of GBP/USD.

EUR/USD RISES AS US PPI DATA MISSES EXPECTATIONS

The EUR/USD rose above the 1.1050 level, following the market's risk-on stance. Weaker-than-expected PPI figures, mixed US economic reports issued earlier this week, and shaky unemployment numbers have fuelled market expectations for interest rate cuts from the Fed. The ECB's move to lower its primary reference rate from 4.25% to 3.65% on Thursday boosted the euro. Today, all eyes are on the University of Michigan's Consumer Sentiment Index, which could be the next catalyst for the EUR/USD.

AUD/USD BUOYED AHEAD OF KEY US DATA

The AUD/USD remains stable at around 0.6730, as recent US data hints that the Federal Reserve may cut interest rates by 50 basis points next week. The Reserve Bank of Australia's (RBA) hawkish tone and a controlled inflation outlook support the Australian dollar. Apart from today's Michigan Consumer Sentiment Index release, rate hike speculation surrounding central bank policies will continue to loom large over the AUD/USD pair.

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