The USD is taking a beating against its major counterparts, marking a significant trend for this year. This is good news for importers/exporters worldwide who have been hoping for some relief after an extended period of USD strength. Recent weeks have seen Sterling emerge as the top performer, making significant gains against both the USD and EUR. However, analysts suggest that this may be due to the struggles faced by the US and Eurozone this week, rather than a reflection of UK economic strength.

Looking ahead, next week promises to be a crucial week for the UK, with the Bank of England’s interest rate decision and GDP data being highly anticipated by traders. There are expectations that interest rates will be hiked by 25bp, taking them up to 4.5%. The terminal rate forecast is set to be between 4.75%-5.25%. Traders will be keeping a close eye on any comments made by BoE members regarding policy moving forward.

Meanwhile, the US has released a significant amount of data this week, including their latest interest rate decision. The Fed acted as forecast, but it is anticipated that this will be their last hike. They will be holding their rates at the next decision with the view to cutting them late this year if the economy begins to falter further and inflation worries subside. However, the Non-Farm Employment and Unemployment data released this afternoon showed that the labour market remains buoyant, which could fuel inflation.

In the Eurozone, the latest base rate was announced, with a 25bp hike taking them up to 3.75%. This is still considerably lower than both the UK and the US, indicating that they will likely need to hike for longer than the rest of the G3. However, this news failed to encourage investors, and the EUR saw losses against GBP, reaching highs not seen this year.

It is worth noting that there will be a bank holiday in the UK for King Charles’s Coronation next week, so markets will be closed until Tuesday. All eyes will be on the BoE interest rate decision next Thursday and GDP data the following day. Jeremy Hunt will be hoping that GDP data holds above 0 as the Conservatives look set to face heavy losses in the local elections taking place today. Overall, it is an exciting time for traders, and we can expect some significant market movements in the coming weeks.