Despite a bullish end to last week from the US Federal Reserve, where key policymakers had indicated that markets were underplaying interest rate expectations, soft inflation data towards the end of this week caused a sharp sell-off in USD. Almost all major currencies gained against the greenback in the move, as speculation continues to rage as to whether the Fed will finally start to dial back the rhetoric, with annualised inflation falling by almost half a per cent month-on-month. The sharp move amidst a generally quiet market environment highlighted the unpredictability and volatility in currency markets, with traders on edge whilst USD remains close to historic levels of strength. For the week ahead, looming large for markets is the release of the new UK government’s first budget statement, which is likely to have a seismic impact on GBP.
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Simon Harvey, Head of FX Analysis
Jay Zhao-Murray, FX Market Analyst
María Marcos, FX Market Analyst