Even with Andrew Bailey’s recent speech, the Pound has continued to rise against the USD this week, which is a significant accomplishment in light of recent trends. Since the 8th of this month, the Pound has gained nearly 5%, a remarkable achievement considering that earlier forecasts projected the Pound to remain below 1.20 until May. The fallout from the SVB continues to loom over the US economy, and while Janet Yellen’s financial aid pledge to support the US banking system has left the Fed with a bulging balance sheet, the Fed faces difficult choices regarding whether to increase their base rate at the next decision. Mixed forecasts abound, but it is likely that the Fed will hold this time and wait to see the impact on current economic conditions. With the Fed anticipated to reduce their interest rates by one per cent by the end of the year, Sterling’s strength is likely to continue throughout the year, and for the first time in a while, sentiment appears to be in the Pound’s favour.

It is essential to note that the US is much further along in its inflationary cycle than the Pound and the EUR, which has resulted in nearly a year of unparalleled USD strength (except maybe CHF). As a result, it was always expected to come to an end, but it felt like a long time coming. The Eurozone has also made significant gains against the US in recent days and is hoping to push above 1.10 in the coming months. However, the EUR has struggled to break through the psychological barrier of 1.0920 in recent times, failing to surpass that level since the beginning of February. Although they have had their own issues of late, such as the Credit Suisse debacle, this presents the first real chance to regain some ground and consolidate themselves at that level.

Looking ahead to next week, my primary concern for the Pound is that the UK will be observing Easter Bank Holidays (7th and 10th April), coinciding with US Non-Farm Employment Friday. Strong results for the US will make it challenging for the Pound to maintain its recent gains, and failing to capitalise on this opportunity and push towards 1.25 while the iron is hot would be a disappointment. The following week is data-heavy for the US, and they will be hoping to regain some lost ground. The Fed faces an increasingly challenging decision regarding whether soft or hot results are beneficial for the US economy. Powell and company will need to consider this question as they determine whether to prioritise inflationary pressure as the main economic marker of financial success.