The Pound-to-Euro exchange rate stabilised at 1.19 following the latest German GDP data and speculations around central bank policies. With market sentiment soured towards the GBP and a lack of notable UK economic data, the Pound is expected to trade in line with Eurozone data. The UK's latest manufacturing PMI, due today, alongside the Eurozone’s latest consumer price index, is likely to influence the GBP/EUR rates.

Pound Struggles Amid Lack of Data

The Pound remains relatively volatile amid the absence of significant economic data. Market sentiment surrounding recent commentary from Bank of England (BoE) Governor Andrew Bailey triggered a sharp decline in sterling against its major currency peers. The release of the UK's latest manufacturing PMI today may stabilise the Pound.

Euro Trembles Ahead of Eurozone CPI Figures

The Eurozone's consumer price index, released on Friday, weighed on the euro. August preliminary CPI figures showed Eurozone inflation eased from 2.6% to 2.2% reaching its lowest levels in recent months. The EUR exchange rate plummeted following the CPI print, which bolstered bets that the European Central Bank might cut interest rates this month. The Euro could further fluctuate based on the Eurozone’s manufacturing PMI for August.

US Dollar Strengthens Amid Recession Fears

The US dollar stabilises despite a lower-than-expected US core PCE price index and recession fears. Dollar gains were driven by US personal spending, which eased recession concerns and mitigated bets on a significant Fed rate cut this month. Favourable market sentiment, coupled with diminishing odds of an aggressive Fed interest rate cut in September, could continue to support the USD.

Australian Dollar Gains on Improved Market Optimism

The Australian dollar remains stable, buoyed by positive economic data and improved risk sentiment for the risk-sensitive AUD. Australia’s Building Permits surged by 14.3% annually, reversing a 3.7% decline in June and marking the fastest growth since May 2023. On a monthly basis, July’s growth reached 10.4%. Additionally, China’s Caixin Manufacturing PMI could further influence the AUD.

Japanese Yen Slumps Despite Hawkish BoJ

The Japanese Yen weakened despite better-than-expected economic data. The recent Manufacturing PMI for August came in at 49.8, up from the previous 49.5. Additionally, core CPI increased to 1.6% year-on-year in August, surpassing the previous 1.5%. However, the latest US Personal Consumption Expenditures (PCE) Index data from July weighed on the JPY against the USD. Rising inflation figures could also prompt a hawkish monetary policy response from the Bank of Japan (BoJ), potentially impacting the JPY further.

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