The GBP/USD pair climbed to near 1.3160 following hotter-than-expected UK inflation data for August. While the Consumer Prices Index rose 2.2% from 12 months to August 2024, unchanged from July, the monthly CPI rose by 0.3% in August 2024. Service inflation rate print sharply rose to 5.6% from 5.2% in July, escalating speculation about an additional interest rate hike from the Bank of England. On the dollar front, Thursday's reports underline that US retail sales rose by 0.1% month-over-month in August, surpassing expectations of a 0.2% decline. Meanwhile, the Retail Sales Control Group grew by 0.3%, slightly below the previous month's 0.4% rise. However, rising expectations for the Federal Open Market Committee to announce a rate cut on Wednesday are shaping market sentiment around the GBP/USD pair.

EUR/GBP WEAKENS FOLLOWING ROBUST UK INFLATION DATA

The EUR/GBP holds steady at around 0.8445 as the pound gains support from robust UK inflation data. Today's economic data indicates that the UK CPI rose at an annual pace of 2.2% in August, aligning with market consensus. Additionally, better-than-expected core CPI, excluding volatile food and energy items, rose to 3.6% year-on-year in August versus 3.3% in July, exceeding market expectations. On the Euro side, comments from European Central Bank Governing Council member Martins Kazaks signalled the ECB's dovish stance, hinting at easing monetary policy. While today's Eurozone Harmonized Index of Consumer Prices data exhibits a better outcome, it is expected to limit the euro's downside. The Bank of England's interest rate decision will be a crucial driver of the EUR/GBP trajectory in the coming sessions.

EUR/USD STEADY AS MARKETS AWAIT FED RATE DECISION AND EUROZONE INFLATION DATA

The EUR/USD pair gains momentum amid rising market sentiment ahead of today's Fed meeting. Also, the European Central Bank's dovish stance demonstrates that future monetary policy decisions will remain data-driven. On the US side, Tuesday's US Retail Sales unexpectedly rose by 0.1% month-over-month in August, compared to 1.1% in July, which was better than the expected -0.2% decline. Meanwhile, Industrial production jumped by 0.8% month-over-month in August, compared to a decline of 0.6% in July, exceeding the 0.2% consensus. Today's Eurozone Harmonised Index of Consumer Prices data and the Fed's monetary policy meeting could further influence the EUR/USD pair.

EUR/JPY WEAKENS AHEAD OF EUROZONE INFLATION DATA

The EUR/JPY edges lower near 157.20 in anticipation of the Eurozone inflation data. In addition, comments from ECB member Gediminas Simkus hinted at the uncertainty surrounding an October rate cut, adding to the pair’s volatility. On the Japan front, the trade deficit expanded to 695.3 billion yen in August from 628.7 billion yen in July, which was better than expectations for a deficit of 1.38 trillion yen. Meanwhile, Exports rose 5.6% year-on-year in August versus 10.2% earlier, falling short of the 10.0% expectation. Imports grew by 2.3% in the same period from a 16.6% jump in July, below the consensus of a 13.4% rise. The Eurozone Harmonised Index of Consumer Prices data is due today, and the Bank of Japan’s interest rate decision on Friday will be the key driver for momentum in the EUR/JPY pair.

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