In the UK this week, it has been a challenging period for the Pound as it attempted to recover from losses incurred the previous week. Moreover, it appeared to be an exceptionally precarious week for the Pound, given the major data releases in the US and Eurozone.

The week commenced with the release of the latest Consumer Confidence figures in the United States. Although these figures fell slightly below expectations, they managed to further bolster the USD, causing both the GBP and EUR to struggle in keeping pace with the seemingly robust US economy. Notably, Adam Posen, a former member of the Bank of England’s Monetary Policy Committee, expressed a grim outlook for the UK. Posen believes that the UK may face a challenging couple of years, with difficulties matching the growth rates witnessed in the US and Eurozone. The grim prediction extends to the possibility of the UK remaining in a recession until the end of the following year. This unfavourable forecast primarily stems from persistent inflation, which could result in sustained higher interest rates compared to its counterparts.

The impact of these economic dynamics on the Pound remains uncertain. Its performance will be contingent on the performance of the UK economy, with high interest rates potentially making it an attractive option for investors. There exists a possibility of a stronger Pound emerging next year, particularly if, as expected, the US and Eurozone begin to cut their interest rates before the Pound.

Shifting our focus to the Eurozone, recent data included German and Spanish Inflation figures. These figures were in line with expectations, with German inflation at 0.3% and Spanish inflation at 3.5%. As it was already priced into the market, this news had a limited impact on the markets. In fact, the Pound managed to gain ground against both the EUR and USD later in the day, although it struggled to breach significant psychological levels.

Looking ahead to the upcoming week, it is poised to be US data-heavy once again. The week will kick off with the release of the latest ISM PMI Manufacturing data on Monday. However, the most anticipated news will arrive on Friday with “Non-farm Friday.” This event provides another opportunity for the US to showcase the resilience of its employment sector and potentially gain further ground against the Pound and Euro.