GBP

Sterling lost some ground against the Euro on Friday as some mixed UK economic data prompted Sterling investors to re assess their expectations for the next rate hike.

Sterling did have a positive as the UKs latest PMI figures came in above expectation this month, which also helped Sterling cap the losses against the Euro earlier in the morning.

Governor Bailey is also concerned that the surge in inflation caused by high energy prices and global supply chain will ultimately feed into domestic inflation rates but we have also seen markets factor in the pricing for a rate hike in November and also the series of rate hikes which could take the bank rate as high as 1% by the end of 2022

USD

Stock markets were sold off ahead of the weekend as a break down in investor risk sentiment and this was linked to comments made by the FEDS chairman Jerome Powell as he gave a firm commitment to the process of ‘tapering’ the Fed’s quantitative easing programme in November.

Powell also hinted at a more aggressive approach to ending easy monetary conditions. He said inflation was likely to last longer than expected and inflation is now well above the Fed’s target and the market took this as a hawkish approach compared to what was expected. Powell joins other central bankers views in striking a more downbeat tone on the outlook for the U.S. and global inflation.