The GBP/USD exchange rate stabilised near 1.3050, the result of a defensive stance in a cautious market mood. Despite positive UK employment data, the pair struggles to hold ground amid fluctuating market sentiment. Currency rates are expected to be driven by the upcoming US inflation data, with the Consumer Price Index (CPI) for August due today. Market expectations of aggressive monetary policy easing from both the Federal Reserve and the Bank of England could trigger volatility in exchange rates.

POUND BUOYED BY UPBEAT UK JOBS REPORT

Sterling gained against major peers following the UK’s latest jobs report and upcoming GDP figures. The ILO Unemployment Rate eased to 4.1%, down from June’s 4.2%. Average earnings, excluding bonuses, came in at 5.1%, as expected, but lower than the previous 5.4%. However, the slowdown in wage growth and market speculation about upcoming BoE interest rate cuts could influence Sterling prices.

US DOLLAR STABILISES AHEAD OF KEY US INFLATION PRINT

The USD remained within a narrow range as investors waited cautiously for vital inflation data. The Dollar struggled to find momentum despite its appeal as a safe-haven currency and an uptick in US Treasury yields. While the first US presidential debate had little immediate impact on the market at the time of writing, traders are focusing on other factors, particularly the release of the August Consumer Price Index (CPI) due today. This data may shape expectations for the Federal Reserve’s upcoming interest rate decision, and could influence the dollar’s trajectory.

EURO SOFTENS AS GERMAN INFLATION SLOWS

The euro declined following the release of the latest inflation report in Germany. As expected, the Harmonized Index of Consumer Prices (HICP) showed a 2.0% year-on-year increase in August. The monthly index showed a steady decline of 0.2%, aligning with forecasts. August’s CPI figures confirmed that inflation remained stable at just 1.9%, boosting expectations of an interest rate cut from the European Central Bank (ECB).

AUSTRALIAN DOLLAR DECLINES BY RISK-OFF FLOWS

The Australian Dollar remains defensive, reflecting the market’s cautious approach to risk-sensitive currencies. Amid concerns over the Australian economy and persistent inflation, market speculation that the Reserve Bank of Australia (RBA) will maintain a hawkish stance on inflation may further influence the AUD.

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