Over the course of last week’s session, the British Pound decreased in value relative to the US dollar and the euro, pressured by indications of a faltering UK economy. Additionally, previously favourable conditions weakened as aggressive BoE rhetoric was replaced with warnings to proceed cautiously. In the end, the dovish turn caused markets to cut expectations for an interest rate hike in November while also raising the possibility that it may even hold interest rates steady in September.

As investors get ready for the ECB’s policy-setting meeting on Thursday, the euro made some progress. While pricing pressures continue to be high and evidence indicates that economic activity is currently falling substantially, there is a great deal of ambiguity around the ECB’s rate decision. In the end, the central bank increased rates at each of its previous nine sessions, and now decision-makers are contemplating whether to hike the deposit rate once more, to 4%, or take a break.

As global risk sentiment strengthened over the weekend, the U.S. Dollar declined in early European trade this morning, falling from a six-month high. Future data on consumer inflation in the United States, which is due on Wednesday, as well as producer prices, which are due on Thursday, will be closely examined for additional hints on the Fed’s monetary policy and the trajectory of interest rates.

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