The GBP/USD pair continues to fluctuate in line with market sentiment. However, the USD may remain under pressure due to market speculation surrounding another oversized interest rate cut by the Federal Reserve (Fed) amid indications of a strong US labour market, which could impact the GBP/USD. Rising tensions in the Middle East could further shape market sentiment, potentially bolstering the safe-haven greenback. Last week, Bank of England (BoE) Governor Andrew Bailey suggested that central banks could become more aggressive if inflation remains controlled. With a dearth of relevant economic data from both the UK and the US, speeches by FOMC members will likely influence the currency pair. The upcoming week’s release of the FOMC meeting minutes, US Consumer Price Index (CPI), and Producer Price Index (PPI) will be key drivers for the GBP/USD pair.

EUR/USD Gains Ahead of German Industrial Production

The EUR/USD pair trades near 1.0985, influenced by a muted US Dollar. However, market anticipation of a smaller Fed interest rate cut in November could limit the currency pair's upside. On Monday, French Central Bank Chief François Villeroy de Galhau suggested that the European Central Bank (ECB) will trim interest rates amid slow economic growth, fuelling market speculation of a potential 150 bp cut over the next twelve months. Friday's better-than-expected US jobs data heightened expectations of a 25 basis point (bp) Fed rate cut, which may strengthen the USD. Germany's latest industrial production figures, issued today, revealed industrial output in the Eurozone's economic powerhouse rose 2.9% month-on-month (MoM), surpassing the expected 0.8% increase, and a -2.4% drop reported in July. German industrial production fell by 2.7% year-on-year (YoY) in August versus July's -5.3%. Today's speech by ECB's Isabel Schnabel could influence the euro if it hints at any dovish stance, potentially driving the price dynamics for the EUR/USD pair.

GBP/EUR Declines Amid BoE Rate Cut Bets

The GBP/EUR pair struggled around 1.1950, following increased speculation regarding the pace of interest rate cuts from the Bank of England (BoE). Despite BoE Chief Economist Huw Pill's suggestion of a gradual approach towards rate cuts, which tempered expectations following earlier bullish comments from BoE Governor Andrew Bailey, the pound remains under selling pressure. In the absence of any notable UK economic data, broader market sentiment will drive the pound; however, comments from European Central Bank (ECB) policymakers and Germany's latest industrial production figures could further influence the GBP/EUR pair in upcoming trading sessions.

USD/CAD Buoyed by Stronger US Dollar

The USD/CAD pair climbed to near 1.3620 due to a stronger US Dollar after the upbeat US jobs data. Friday's employment reports indicated a rise in Nonfarm Payrolls (NFP) and a drop in the unemployment rate, boosting speculation about Fed rate reductions. Expectations for a larger interest rate cut by the Bank of Canada later this month, coupled with escalating tensions in the Middle East, could further underpin the commodity-linked Loonie. In the absence of significant market-moving economic data from both sides, speeches by FOMC Member Raphael Bostic, oil price dynamics, and geopolitical developments could further influence the USD/CAD pair in today's trading sessions.

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