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Touching four-week highs

Pricing in a rate hike

Markets are beginning to price in the possibility of an interest rate hike by the Bank of England by May 2022. The general consensus is that there would be a spring 15 basis point rate hike, followed by another later in the year. However, despite this, the Pound to US Dollar impact has been relatively muted. The UK's petrol shortage panic is expected to see British Prime Minister Boris Johnson draft in an armed forces response to ensure fuel tankers make their way around the country, while temporary visas are granted to new HGV drivers. Supply chain constraints could potentially hinder growth prospects later in the year. Bank of England Governor Andrew Bailey will speak in the week ahead, and the UK final growth and manufacturing stats will be out.

Worst defeat

Last week, the Pound to Euro exchange rate closed 0.44% lower after touching two-week lows; against the US Dollar, the Euro traded in a tight range. The Social Democrats won Germany's latest election in European politics, with current Chancellor Angela Merkel's Christian Democratic Union suffering its worst defeat in the party's history. The Social Democrats are expected to seek a coalition with other parties, which could take months to finalise. European Central Bank President Christine Lagarde will speak in the week ahead, and Eurozone inflation data will also be released. Additionally, some moderately influential German stats will make their way onto the market.

GBP/USD touches four-week lows 

The Pound to US Dollar exchange rate reached four-week lows last week, closing 0.47% softer than where it began—the third week of declines in a row. On Wednesday, the Federal Reserve announced that tapering of its monetary stimulus would start in November and should end by the middle of 2022. In the week ahead, Federal Reserve Chairman Jerome Powell will speak, and the latest inflation data will reach the market, which could shine more light on the Fed's decision to taper. US Manufacturing data will also be released.

Touching four-week highs

Last week, the Pound to Australian Dollar exchange rate reached four-week highs before finishing 0.43% lower. Meanwhile, Sterling traded flat against the New Zealand Dollar, closing just 0.06% softer after recovering from two-week lows. Australian retail, building, and manufacturing data will be released in the week ahead, while New Zealand will publish both business and consumer sentiment stats. Meanwhile, Australia and New Zealand's largest trading partner, China, will also release data, in the form of manufacturing figures. These can often be influential, for the Australian Dollar in particular, as one of Australia's most significant exports is iron ore.

Five-week highs 

Although the Pound to Canadian Dollar exchange rate touched five-week highs earlier in the week, the currency pair ultimately closed last week's trading 1.36% lower. In the week ahead, wage growth data for July will emerge, as well as economic growth stats for July, and manufacturing figures, all of which could moderately influence the Canadian Dollar exchange rate.