As widely anticipated, the Bank of England has implemented a 0.25% increase in interest rates, bringing the Bank rate to 4.50%.

The decision to raise rates was met with a split vote of 7-2, indicating that the markets foresee one more hike before reaching the peak. However, there are expectations of rate cuts next year as inflation continues to decline and the focus shifts towards the possibility of a recession.

The underlying economic data presents a challenging situation with conflicting signals.

This week, the spotlight will be on the crucial jobs data, which remains a vital factor in determining monetary policy.

Meanwhile, the US Central Bank has likely reached its rate peak, and market expectations point towards aggressive cuts in the latter half of this year. Inflation data for last week showed a decrease to 4.9%, but the overall outlook remains highly uncertain.

Persistent concerns regarding the stability of the US banking system are resulting in stricter lending standards, which could potentially impede growth. Additionally, ongoing negotiations regarding the debt ceiling are weighing on market sentiment.

Comments from officials at the European Central Bank emphasize the likelihood of further rate increases in the coming months. They maintain a particularly hawkish stance, having started hiking rates later and from a lower starting point.

Volatility remains elevated, and confidence levels are notably low due to the highly uncertain outlook. The GBP/USD exchange rate has declined from its peak of 1.2680 earlier this year to 1.2500, while GBP/EUR remains near its highest level of the year at around 1.1500.