The collapse of SVB bank has posed the greatest challenge to financial markets since the 2008 banking crisis, prompting authorities to take measures to prevent any contagion and restore confidence.

The fixed income markets have experienced significant turbulence, increasing pressure on the Fed ahead of the upcoming rate decision. Despite underlying inflationary pressures remaining high, we anticipate a 0.25% hike from the US central bank. However, the expected peak has been substantially lowered due to the market fallout from the bank's failure.

In the UK, analysts have conflicting views on whether the Bank of England will raise rates by 0.25% next week or wait until the May meeting, given the buoyant job market and uncomfortably high inflation. The markets now expect a peak of 4.25%, with possible rate cuts in the following year.

The budget's passage elicited minimal market response, likely meeting the chancellor's expectations.

Despite market turbulence, the European central bank raised its benchmark rate by 0.50%, reflecting its hawkish stance.

Rising global geopolitical tensions remain a growing concern, weighing on market sentiment.

On the exchanges, sterling has outperformed, reaching a monthly high of 1.2200 against the dollar and surpassing 1.1400 versus the Euro.

This week, market sentiment has been shaped by Fed chair Powell's warning that the US central bank is likely to take a more aggressive stance on rate hikes. This has led to a risk-off environment, causing global stocks to suffer and bolstering the dollar.

In response, analysts have increased their predictions for the peak in interest rates for both the US and UK, as inflation continues to remain high.

The Bank of England is expected to raise rates by 0.25% this month, resulting in another split vote. The projected peak in rates for the UK is now at 4.85% later this year. Friday’s UK growth data was slightly better than expected, but next week's jobs data and budget announcement will be crucial for the economic outlook.

Meanwhile, in the US, despite the risks of a sharper recession, Powell has indicated that rates will increase and remain high for longer than expected. The market is predicting another 0.50% hike this month, with today's payrolls data and next week's inflation report being key factors.

The European Central Bank is also maintaining a hawkish stance on rates, with a 0.50% hike fully priced in for next week's meeting. Rates are forecasted to peak around 4% later this year.

As a result of Powell's comments, the dollar has significantly strengthened, putting pressure on sterling due to the expected interest rate differentials.

The projected peak in global interest rates is being revised upward due to persistently high inflation. The Bank of England is expected to raise rates by 0.25% at its next meeting on March 23, which would take rates to 4.25%. However, crucial inflation and jobs data released before the meeting will be crucial to the outcome of what is likely to be another split vote. Additional rate hikes are expected in the coming months, with a forecasted terminal rate of 4.65%.

Nationwide's house price data showed the most significant annual decline since 2012, and mortgage approvals also dropped significantly due to higher borrowing costs and the continuing squeeze on real incomes. Analysts are predicting a 10% drop in house values this year.

The US economy remains robust, and the Fed is expected to raise rates by at least 0.25% this month, with the projected peak now at 5.50% by mid-year.

In Europe, strong inflation data this week reinforces the possibility of more aggressive rate increases in the coming months, with an anticipated increase of 0.50% this month, as the central bank remains particularly hawkish.

The next critical focus point is the US payrolls data, which is due to be released on Friday.

This week's UK economic data has exceeded expectations, with business activity expanding and confidence surveys showing stronger results than anticipated. This positive growth outlook may lead to increased inflation and potentially longer periods of higher rates.

The Bank of England is expected to raise rates by 0.25% in March, bringing them up to 4.25%, with the possibility of one more hike in May before they reach their peak.

In the US, data is still strong, and the Federal Reserve's recent minutes show that they are more concerned with inflation than recession. This suggests that further rate hikes are expected in the upcoming months, with rates potentially peaking around 5.35% mid-year.

Similarly, in Europe, survey data has surpassed expectations, leading to predictions of a 0.50% rate hike in March and additional increases in the future as the central bank remains committed to reducing inflation.

Despite these positive economic developments, global geopolitical tensions continue to increase, causing a decline in market sentiment and risk appetite. This week, China and Russia have raised the rhetoric, adding to the uncertainty.

In the foreign exchange markets, there is a lack of momentum and conviction in any significant trends due to the uncertain backdrop. GBP/USD is experiencing ongoing demand below the psychological level of 1.2000 and is expected to receive significant support at 1.1750. Meanwhile, GBP/EUR has risen due to strong UK data, but it remains within the established range of 1.1000 to 1.1500.