As we venture into uncharted economic territory, with markets seemingly shifting their focus towards economic growth as opposed to interest rate hikes, it comes as no surprise that both the GBP (British Pound) and EUR (Euro) have experienced setbacks, while the USD (U.S. Dollar) has emerged as a frontrunner. On Wednesday morning, the UK released its latest GDP m/m figures. In a scenario where economic growth takes centre stage for markets, GDP ratings become a critical point of interest. Unfortunately for the UK, the GDP figures came in worse than anticipated, with a contraction of -0.5% compared to a forecast of -0.2%. Poor weather conditions and strikes were cited as contributing factors. While this drop wasn’t significant enough to warrant panic, it certainly didn’t bolster the already struggling Pound.

Yesterday, the Eurozone witnessed the latest interest rate decision from the ECB, which took markets by surprise with a 25-basis point hike. This move went against expectations, as most forecasts had anticipated a rate hold. This decision might exacerbate Germany’s economic challenges, as the country is expected to remain in recession for the rest of the year. However, ECB President Christine Lagarde and her co. evidently believe that further action is necessary to address persistent inflationary pressures in the Eurozone.

On the other side of the Atlantic, the United States released its latest retail sales figures, which showed an unexpected uptick of 0.7%, surpassing the forecast of 0.4%. This development added more pressure to the USD’s competitors as the Dollar continued to strengthen. It’s evident that the USD is currently on an upward trajectory, disappointing many importers in the UK who enjoyed a stronger Pound two months ago.

With little to no significant data scheduled for release in the UK until next Wednesday, when the latest CPI data is expected, it appears that the UK may have limited opportunities to regain lost ground in the immediate future. However, the coming week is likely to be characterized by heightened volatility, with interest rate decisions scheduled in both the UK and the US, along with the release of the latest inflation data in the UK. Additionally, flash PMI data for manufacturing and services sectors will be released in the UK, US, and Eurozone on Friday. All these major data points may lead to significant market swings, but whether these fluctuations will favour the Pound, particularly against the USD, remains uncertain.