Currency markets were relatively calm last week due to a US bank holiday, allowing central bank policies to take center stage. A new member of the Bank of England committee expressed a hawkish view, supporting the idea of further interest rate increases and the potential for an extended period of higher rates. However, finding the right balance between curbing inflation and avoiding long-term damage to the housing market and the overall economy poses a significant challenge.

Market expectations continue to reflect a Bank rate above 6% by the end of the year, with a strong likelihood of a 0.50% hike in August. UK government bonds are trading at their highest levels since 2007. The focus remains on inflation and the tight job market, with upcoming data on employment figures next week and an inflation report the following week.

In the United States, minutes from the recent central bank meeting indicate that despite last month's pause, the Federal Reserve is still likely to raise rates by 0.25% this month, although it may be the peak depending on economic data. Today's attention will be on the payroll numbers, while next week brings the latest inflation report, with a projected decrease in the headline figure to 3%.

Regarding the European Central Bank, market forecasts anticipate two more rate hikes, including a 0.25% increase later this month, as the focus remains on the inflation outlook.

In the currency exchanges, there is a lack of strong conviction or clear trend amid the highly uncertain backdrop. The demand for the British pound remains robust due to the expectation of higher interest rates. However, the established short-term trading ranges of 1.2500 - 1.3000 against the US dollar and 1.1500 - 1.1750 against the Euro continue to be significant factors.