As discussed last week, it was always expected to be a challenging period for the Pound. The UK had just one major data release, while the US and Eurozone had a busy schedule, and the Pound had been showing signs of weakness. Nevertheless, there was a brief uptick for the Pound on PMI Tuesday. This was due to better-than-anticipated Flash Manufacturing data, which came in at 45.2, exceeding the forecast of 44.7. However, this uptick was short-lived, and by the afternoon, the gains were erased as the US PMI results exceeded 50 for Flash Manufacturing for the first time since April. This reasserted the dominance of the US Dollar over its main competitors, particularly the Pound, which dropped by nearly 2% at one point.

The political backdrop of the Israeli-Palestinian conflict adds further uncertainty to the currency market. Major developments in that region can easily overshadow any data-related factors. However, assuming no significant developments, next week promises to be extremely volatile. There is a plethora of data to consider, culminating in the latest interest rate decisions from both the Federal Reserve and the Bank of England, scheduled for Wednesday and Thursday, respectively.

While both central banks are likely to maintain their base interest rates, the market will scrutinize the speeches by their keynote speakers, Andrew Bailey in the UK and Jerome Powell in the US, for any hints of future rate hikes or cuts in the future. In the Eurozone, we will also have the latest Flash CPI readings from Spain and Germany. Given the recent decision by the ECB to hold interest rates, these inflation figures will be of particular interest, as Christine Lagarde and her team look for signs of a potential drop in headline inflation.

In addition to these events, the market will closely monitor the latest Non-farm Employment data from the US, set to be released next Friday. This data assumes added significance, especially in light of the impressive GDP figures from the US, which showed a quarter-on-quarter growth of 4.9% compared to the forecasted 4.5% (still a substantial improvement from the last reading of 2.1%). Market observers will pay close attention to this report for any signs of easing inflation.