GBP/USD hovered near 1.2800 amid cautious sentiment following Wednesday's US Consumer Price Index (CPI) data. Markets anticipate US CPI inflation to rise to 2.7% YoY in November from 2.6%, while core CPI, excluding food and energy, is expected to increase to 3.3% YoY. Any deviation in inflation figures could significantly influence Federal Reserve (Fed) interest rate expectations for the 18 December policy meeting, impacting the dollar. On the sterling front, expectations for the Bank of England's (BoE) potential interest rate decision in December's policy meeting are supporting the pound. Friday's UK monthly Gross Domestic Product (GDP) and Industrial and Manufacturing Production data for October could shift current expectations that the BoE will maintain its 4.75% interest rate. Today's US Consumer Price Index (CPI) report for November will be crucial in shaping the GBP/USD price dynamics.

EUR/USD Muted by ECB Dovish Bets

EUR/USD continues its downward trend for the fourth consecutive day, trading near 1.0514, as the dollar gains amid market caution ahead of US Consumer Price Index (CPI) figures and rising US Treasury yields. Shifts in inflation figures, US labour market conditions, geopolitical tensions, and concerns over President-elect Donald Trump's proposed trade tariffs could further impact the greenback. In the Eurozone, speculation of an aggressive ECB interest rate cut to stimulate economic activity weighs on the euro. The ECB is widely anticipated to implement a 25-basis-point cut, lowering the Main Refinancing Operations Rate from 3.4% to 3.15% and the Deposit Facility Rate from 3.25% to 3.0%. Apart from today's US Consumer Price Index (CPI) data, tomorrow's European Central Bank (ECB) policy decision will be a key driver for the EUR/USD exchange rate.

AUD/USD Muted by Stronger USD

The Australian dollar (AUD) remains subdued against the US dollar (USD) following the Reserve Bank of Australia (RBA) interest rate decision. AUD/USD tumbled sharply below 0.6400 as RBA Governor Michele Bullock retained the key Official Cash Rate (OCR) unchanged at 4.35% for the ninth consecutive meeting. She emphasised that future policy decisions would be data-dependent, with inflation expected to return to the central bank's 2% target. In contrast, the USD strengthened ahead of November’s US inflation figures for and rising Treasury bond yields. In upcoming sessions, US Consumer Price Index (CPI) data, Australian employment figures, and sentiment around the Federal Reserve's (Fed) interest rate decision will be key influences on AUD/USD exchange rates.

USD/CAD Buoyed Ahead of BoC Decision

USD/CAD gains momentum near 1.4180 as markets turn cautious ahead of US consumer inflation figures and the Bank of Canada (BoC) policy decision. The BoC is widely anticipated to reduce its benchmark interest rate by 50 basis points, following November’s larger-than-expected rise in the unemployment rate to 6.8%. A surge in oil prices has bolstered the crude-linked Loonie, but any divergence in the BoC's decision could impact the currency. Meanwhile, the US dollar has climbed on rising Treasury bond yields. In the upcoming sessions, the BoC's interest rate decision, US inflation figures, and crude oil price dynamics will shape sentiment around USD/CAD.

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