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Huge week ahead on financial markets

Exciting week ahead with 3-days worth of blockbuster data releases..



It ended up being yet another strong week for the Pound last time out, even though things started off a bit shaky. An initial 1% loss was regained as the week went on in what was a very boring trading period due to little-to-no data. Things are very different this week though with a flurry of releases that are sure to create market volatility.

Tomorrow's labour numbers are important as is the GDP figure released on Wednesday (both for April). They are key drivers for the BoE in terms of what to do with interest rates and so will be analysed closely. However, the Pound will be very much moved from events elsewhere this week (see below) as more crucial data points are available for traders.

If things were negative for Sterling at present, this week would most certainly be classed as a huge risk event. But, as GBP sits firmly at the top of the best performing G10 currency in 2023, the releases are being classed as mere hurdles.

£-€ hit a 10-month high at opening earlier today and the £-$ rate is currently trading at a 1-year high. Things are looking very good at present for £ sellers..

The single currency managed to turn its recent poor form around versus the US Dollar last week, but continued to suffer against the Pound. The near future looks really uncertain for the Euro with inflation seemingly under control (so interest rates no longer need to be hiked) and recession fears taking hold. 

Thursday's interest rate decision looks to see a rise of 25bp with consensus for a further hike next month. Anything less in the result or forward guidance for next month and the Euro will be in trouble. Simply out of favour across the board, it could be yet another struggle for the € this week. 

The US sees a huge week ahead for data with almost everyday (apart from Friday) delivering a high level release. When weeks like this happen, we face an 'all bets are off' scenario, as there are too many variables at play to guess what could happen with rates.

USD was sold off last week as some investors bet the Fed wouldn't be hiking interest rates on Wednesday. The market sees just a 30% chance of a hike, but we have been here a few times before this year with this outlook not coming to fruition, so I wouldn't rule out one more hike in the Fed cycle.