In what was supposed to be a relatively quiet week (data wise), what a week it has turned out to be for the Pound. Having seen the UK’s manufacturing and services PMI’s coming in stronger than expected (although still below the key 50.00 level) early Wednesday morning, the Pound began to pick up traction against most of its major rivals. This began to snowball following the US services and manufacturing PMI data, which came in softer than expected, resulting in Cable rising from 1.18 to 1.21 in a day (higher than it has done since mid-august). As risk-on sentiment prevailed, the Pound also finally saw some movement against the generally stagnant of late GBP/EUR, with it trading above 1.16 for the first time since early this month. The BOE and business owners across the country will hope that we will begin to consolidate above 1.20 against the USD and carry this momentum into the new year with the outlook now looking considerably more positive and hopes that the Sterling will reach 1.25 once again in the early part of next year now seeming a lot more realistic.

With limited data coming out between now and the Christmas break, all eyes are on the next interest rate decisions for the US, the Eurozone and the UK (out on the 14th and the 15th of December respectively). The FOMC meeting minutes released late Wednesday appeared to show that the Fed are preparing to slow down their interest rate hikes with the ECB and BOE likely to follow suit at some point next year; meaning this could potentially be the last bumper rate hike that we see from the major central banks. It is a difficult decision at the moment for the Central banks, with inflation still far exceeding target levels. If this were to persist it would indicate the need to continue increasing interest rates in order to bring inflation down to a more manageable level. That said, however, with a tightening labour market and a major crash incoming on the housing market, this is by no means an easy decision. Further hikes are likely to exasperate these tightening market conditions, most prevalently in the mortgage market, which will likely begin to falter early next year as people begin to feel the pinch of higher interest rates. This means the central bank speakers are now going to be scrutinised heavily with any indications as to the central banks’ plan on battling inflation likely to create extreme volatility in the markets.

Overall, the coming month (although light on data) is likely to set a precedent for next year and could give vital indications as to how the major currencies will perform in the coming months; hopefully setting the pound up to reach the levels we saw in the early part of this year.