The big question in the currency markets this week was always going to be: Will the Pound hold onto its recent gains now that it’s the UK’s turn to be in the data hot seat? In short, the answer is both yes and no. While there has been a slowdown in momentum and a slight dip against the EUR and USD, the Pound has remained relatively stable over the past week. Even with another hot CPI figure leading to the Bank of England’s decision to go for a 50bp hike in interest rates, Sterling has managed to hold its ground. Andrew Bailey, in a hawkish speech following the decision, pointed to rising wage expectations as a key reason for the persistent inflation figures, which is unlikely to resonate with many. However, this leaves the economic outlook for the UK for the rest of the year uncertain, with the housing market already feeling the strain and the latest rate hike potentially pushing us into a recession. Difficult times may lie ahead. Nevertheless, in the currency markets, particularly against the USD, we are still anticipating gains towards the end of the year, although it is now more likely to be highly data-dependent.

Moving on to PMI Friday, the Eurozone was up first. Unfortunately, the results were poor across the board, which is somewhat contradictory to Christine Lagarde’s comments and the market’s overall expectation of persistent inflation throughout the year. Nevertheless, I still anticipate the European Central Bank (ECB) to continue with their rate hikes well into this year, as the PMI results are likely to be an offshoot of the technical recession the Eurozone entered over the last couple of weeks, rather than a sign that headline inflation is on the way down in any significant way. Next up was the UK, which this morning also posted underwhelming figures, with both Services and Manufacturing coming in below forecasts. Retail sales in the UK also showed a slight drop-off but remained in positive territory, exacerbating some inflationary worries. Finally, the US will release its data later this afternoon, with expectations of an improvement in month-on-month manufacturing figures and a marginal decline in services.

Looking ahead to next week, there is limited data scheduled for release. The major releases will be consumer confidence in the US on Tuesday and GDP/Unemployment figures on Thursday. Therefore, the speeches by Andrew Bailey and Jerome Powell on Wednesday are likely to be the main drivers behind market fluctuations and any comments made on monetary policy moving forward will be highly scrutinised.