The pound slipped against the dollar as the greenback found a modest recovery, driven by its safe-haven appeal. The GBP/USD pair edged lower, pressured by dovish comments from Federal Reserve policymakers and strong US Retail sales figures. The pound is undermined by growing market expectations of further interest rate cuts by the Bank of England (BoE) in November and December. The UK Consumer Price Index (CPI) inflation showed a sharp decline to 1.7%, falling below the BoE’s 2% target. However, better-than-anticipated Retail Sales provided some support for the pound. In the absence of notable economic releases from either economy, broader market sentiment is likely to drive the GBP/USD exchange rate in the near term

EUR/USD Subdued by ECB Comments

The EUR/USD pair lost momentum, trading near 1.0860 following dovish remarks from ECB Governing Council member Gediminas Šimkus. The policymaker suggested that rates could fall below the natural level if disinflation becomes entrenched, fuelling speculation of more aggressive monetary easing. The ECB’s recent 25 basis points rate cut has already put downward pressure on the euro. Meanwhile, US Retail Sales rose 0.4% month-on-month in September, exceeding both August’s 0.1% gain and forecasts of 0.3%. Market focus will now turn to Germany's Producer Price Index (PPI) figures and speeches from FOMC members for further direction.

EUR/GBP Muted Following Germany PPI Data

The EUR/GBP pair held steady at around 0.8330 following the release of Germany's PPI report. The Producer Price Index fell 1.4% year-on-year in September, extending the 0.8% drop seen in previous months. On a monthly basis, PPI decreased by 0.5%, marking the first decline since February and exceeding expectations of a 0.2% fall. Cooling inflationary pressures and recent ECB rate cuts continue to exert selling pressure on the Euro. Meanwhile, UK CPI and PPI inflation figures and weak labour market data have fuelled expectations of a 25 basis points interest rate cut by the BoE in November, undermining sterling. The upcoming sessions will see the EUR/GBP pair influenced by sentiment around central bank policies and German PPI data.

AUD/USD Strengthened by RBA Sentiment

The AUD/USD pair edged higher to around 0.6715, supported by fluctuations in the USD. Robust US economic data dismissed speculations about aggressive Fed policy easing, limiting the USD's downside. Concerns around the upcoming US elections and geopolitical tensions in the Middle East could inject further volatility. Meanwhile, upbeat employment data strengthens the Australian Dollar. In addition, the People’s Bank of China (PBoC) reduced its one-year Loan Prime Rate to 3.10% and the five-year LPR to 3.60%, moves expected to stimulate the Chinese economy and potentially boost demand for Australian exports, supporting the AUD. Investors will closely monitor developments in the Reserve Bank of Australia’s monetary policy and broader geopolitical events for further direction in the AUD/USD pair.

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