Pound Treads Water While Euro and Dollar Face Pressure.

• EUR struggles: The Pound-Euro exchange rate stayed stable, with the Euro weakened by increased expectations of ECB rate cuts after dovish comments from ECB officials.
• Rate cut speculation: ECB members Mārtiņš Kazāks and François Villeroy de Galhau signaled the likelihood of more rate cuts, as Eurozone inflation cools, leading to market predictions of two consecutive cuts this year.
• USD strength: The GBP/USD pair dipped due to safe-haven demand for the U.S. Dollar amid geopolitical risks, with stronger-than-expected U.S. PPI data and jobs report supporting the dollar.
• UK economy: The pound remained at a one-month low against the dollar, despite data showing a 0.2% growth in the UK economy for August, ending two months of stagnation.
• BoE focus: Investors are waiting for key UK inflation and labor market data next week to gauge the Bank of England’s stance ahead of its November meeting, as the pound faces pressure.

EUR:
The Pound Euro (GBP/EUR) exchange rate held steady on Thursday, lacking any major data releases from both the UK and Eurozone. As of the time of writing, GBP/EUR traded around €1.1859, virtually unchanged from the day’s opening rate. The Euro (EUR) struggled to attract investor interest, weighed down by growing speculation of interest rate cuts from the European Central Bank (ECB). This followed several dovish comments from ECB officials throughout the week. Mārtiņš Kazāks, an ECB member, earlier signaled the need for further rate cuts, a sentiment that was reinforced by his colleague François Villeroy de Galhau, who stated that another cut is “very likely.” As inflation in the Eurozone continues to cool and dovish remarks increase, markets are now expecting two consecutive rate cuts this year, weakening the common currency further on Thursday.

USD:
The GBP/USD pair saw mild losses, trading around 1.3060 during the early European session on Monday. Safe-haven flows, driven by rising geopolitical risks, bolstered the U.S. Dollar and dragged the pair lower. Investors are eyeing the release of UK employment data, scheduled for Tuesday. Meanwhile, U.S. data released on Friday showed that the annual Producer Price Index (PPI) rose 1.8% year-over-year (YoY) in September, slightly below August’s 1.9% but above market expectations of 1.6%. The core PPI also surpassed forecasts, climbing 2.8% YoY. While monthly PPI remained flat, the core PPI edged up by 0.2%. Federal Reserve (Fed) officials are now focusing on balancing inflation control with job market stability, but a strong September jobs report and lower expectations of a 50 basis point rate cut in November could further support the U.S. Dollar against the Pound (GBP).

GBP:
On Friday, the pound hovered around a one-month low against the dollar, receiving little support from data indicating that the UK economy returned to growth in August. Sterling remained flat at $1.3069, near the $1.3011 low from Thursday, its weakest point since mid-September. It also remained unchanged against the euro at 83.70 pence. Economic output grew by 0.2% in August, in line with economists’ expectations and marking a return to growth after two months of stagnation. Despite this, the pound was largely unmoved. Lee Hardman, Senior FX Strategist at MUFG, commented that while the data confirms a slowdown in the UK economy in the second half of the year, it wasn’t unexpected. Investors are now looking ahead to next week’s key inflation and labor market reports, which could provide clearer signals ahead of the Bank of England’s November meeting. Much of the pound’s support this year has been tied to expectations that the Bank of England will cut rates more slowly compared to the Federal Reserve and the ECB.