In a week that promised plenty of talking points and key data releases, it was always going to be a very volatile week, and it did not disappoint. For the Pound, the week was a bit of a mixed bag, with it managing to hold onto recent gains against the Euro but losing ground against the US Dollar.

The movement around the EUR/GBP currency pairing started the week looking as if recent gains were going to be wiped out, with the Eurozone posting a number of inflationary results, most notably in Spain, where CPI came in at 3.4% (forecast to be 3%) and Italian GDP, which was expected to show no growth but ended up showing growth of 0.2%. These encouraged expectations of the ECB opting to keep interest rates higher for longer and, in turn, saw the EUR gain traction against both the Pound and the Dollar.

However, this was short-lived, with the Pound gaining back the losses on Wednesday in the approach to the next round of interest rate decisions in both the US and UK. Up first was the Fed, who were highly anticipated to hold rates once more, which is exactly what they did. However, following a number of inflationary results recently, the emphasis for markets was always going to be whether Powell continued his recent dovish tone. He did not and effectively ruled out a March rate cut. This boosted the USD and saw the Pound drop to its lowest level against the Dollar since January 17th.

The following day it was the Bank of England who would have to make their decision. Much like the Fed’s decision, they were highly tipped to hold their rates, which they did. This was priced into the markets and, realistically, the impact was limited, especially considering that Bailey continued his narrative that rates will remain higher for longer. The only slight surprise was that one member voted to cut the base rate. Later today, we will see the US post its latest non-farm employment figures, which will be closely watched after the hawkish tone from Powell after the latest interest rate decision.

As we look to next week, there is very limited data out, with unemployment claims being the only standout release. However, with the US approving attacks on Iranian targets in Iraq and Syria and with the USD considered the safe-haven currency, it will be interesting to see how this develops and how the markets will react.