The Weekly Round-up

This week presented what initially appeared to be a promising opportunity for the Pound to extend its recent strength against both the EUR and USD. With limited significant releases in the UK and a slew of potentially detrimental data on the horizon for the US and Eurozone currencies, the stage seemed set for the Pound to maintain its upward trajectory. Indeed, this proved to be the case as the Pound delivered an impressive performance throughout the week.

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Against the USD, we commenced the week at multi-month highs, and this upward trend persisted consistently. Notably, positive US CB Consumer Confidence figures released on Tuesday had an unexpected impact, causing the Pound to breach key psychological points by Wednesday. The Pound's momentum was particularly noteworthy, reaching highs not witnessed since late August. This accomplishment is even more remarkable considering it coincided with the US posting stronger-than-anticipated preliminary GDP results q/q at 5.2%, exceeding the forecasted 5.0%. If the Pound sustains this positive momentum, the earlier projections of it finishing the year as the strongest performer in the G7 remain on track. Investors are now eyeing Jerome Powell, the Chair of the Federal Reserve, who is scheduled to speak twice later today, raising hopes of further gains before the week concludes.

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In the Eurozone, the focal point of the week was the release of the latest CPI figures. Notably, Spain, Germany, and Eurozone-wide figures all indicated a deceleration in headline inflation. Coupled with recent dovish comments from ECB members, it comes as no surprise that the GBP/EUR pairing experienced movement after what felt like an extended period of stagnation. The Pound achieved highs not observed since late September.

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Looking ahead to the coming week, the UK data calendar remains light, with the highlight being Andrew Bailey's press conference concerning the Financial Stability Report scheduled for Wednesday at 11 a.m. As always, there is potential for market volatility surrounding this event as traders analyse clues regarding future monetary policy. Beyond the UK, attention once again turns to the US for significant developments. The release of the latest non-farm employment figures next Friday will be closely monitored, particularly in the wake of a week featuring robust inflationary figures from the US. A higher-than-expected reading could prompt the Federal Reserve to reconsider its monetary policy moving forward.