Another week has gone, but the gains the Pound has seen over the last two days will be tough to wipe out. We have seen massive gains in USD, JPY, and EUR this week, and it is now becoming increasingly apparent that this may well be the Pound’s year. When you consider the fact that we have seen the Pound gain the best part of 20% since last September and climb to its highest level in over a year, it might seem surprising that Jerome Powell (despite pausing their interest rate hikes for the first time in 10 meetings) gave a pretty hawkish speech indicating that the Fed was expecting to hike their interest rates two more times this year, which would take their base rate up to 5.75%, assuming they went with two 25bp hikes.

These comments, however, did not see any renewed USD strength, and mixed results on Thursday afternoon in their retail and unemployment figures. Unemployment claims were up, indicating that the effects of high-interest rates were starting to take their toll on the US employment market. However, stronger than anticipated results in the latest retail sales show that section of the economy remains buoyant and could be fueling inflation. This leaves the Fed in a state of purgatory as they look to see whether or not inflation will persist before making their next decision.

It has been a case of no news is good news for the Bank of England this week. The only major data out this week in the UK was the latest GDP figures last Wednesday. It showed that for the time being, the UK economy has grown (albeit by only 0.2%). These latest figures show once again that the comments surrounding the outlook for the UK economy at the start of this year, made by the IMF and many major forecasters, have proved to be, at least for now, a little hasty. As of now, the Pound has been the outstanding performer in the currency markets. We are seeing yearly highs against USD, 8-year highs against JPY, and multi-month highs against EUR and CHF. It certainly seems as if the Pound is the currency to be.

The ECB opted to hike their rates once again by 25bp, and Christine Lagarde indicated that they still have quite a way to go when it comes to curbing inflation. This, combined with the struggles of the USD, saw EUR/USD move in favour of the single currency following a difficult start to the week for the Eurozone. However, it did little to stop the Pound gaining more ground. Next week, it is the BoE’s turn to decide their latest movements regarding their base rate. Although a 25bp increase is highly likely, I would still expect a considerable amount of volatility, and it will be interesting to see if Sterling continues to climb.

Elsewhere in the world, we have big weeks for both the Eurozone and the BOJ, who will both make their latest monetary policy statements, which, with the JPY seeing 10-year lows against Sterling, is surprising considering they were forecast to see extreme strength in the opening few months of this year. EUR has suffered over recent weeks as well, with them moving into a “technical recession” yesterday and losing more ground against Sterling, and now looking likely, once again, to fall to multi-month lows against GBP. Although, as we have seen in recent months, it can all change in an instant—at least for now, Sterling is King!