Financial markets returned to some relative calm this week following the recent turbulence and central bank rate rises. However, uncertainty remains high and fixed-income markets continue to be volatile on the uncertain interest rate outlook.

Analysts anticipate one more rate hike from the Bank of England, potentially reaching a peak of 4.50%, subject to the inflation and job data in the upcoming months. In the US, there is a mixed perspective on whether rates have reached their peak or if there will be an additional hike in May. Rate cuts are being projected for later in the year as the focus shifts from inflation to growth. Meanwhile, the European Central Bank remains the most hawkish and will likely continue to hike rates in the following months, prioritizing the reduction of persistently high inflation.

Global geopolitical tensions continue to be a cause for concern, impacting market sentiment, although equity markets have stabilized recently.

Looking ahead, the upcoming week is expected to be relatively quiet due to the Easter Bank Holiday weekend. The UK calendar begins with Manufacturing PMI on Monday, followed by the crucial Services PMI on Wednesday. We anticipate that both indicators will remain unchanged, with the manufacturing sector continuing to contract, while the services sector remains relatively stable. The highlight of the week in the US is Non-Farm payrolls, with a slight decline from 311k to 238k anticipated for February.

On the exchanges, volatility remains high with a real lack of conviction or trend on the hugely uncertain outlook. GBP/USD remains near its recent highs above 1.2300 whilst GBP/EUR has drifted lower from the recent highs at 1.1400.