hey were led by the Turkish Lira, which soared higher after its central bank hiked interest rates by a sizable 6.25 percentage points to 24%, in an apparent return to sane monetary policy. This caused the Lira to outperform every other major world currency for the second week running. Lower-than-expected inflation readings out of the US also helped by dragging down both US bond yields and the US Dollar, which ended the week down against every other currency, except for those in Asia. The latter were kept on the back foot by continued uncertainty over the outcome of the trade conflict between the US and China.

Central bank meetings will steal the spotlight this week in both G10 and emerging market countries. Most critical will be the Bank of Japan, Norges Bank, South African Reserve Board, Swiss National Bank and Banco Central do Brasil.

Major currencies in detail

GBP

The Bank of England left policy unchanged on Thursday, as universally expected. Further positive comments from the Brexit negotiations did, however, support Sterling last week. In particular lead EU negotiator Michel Barnier suggested that an agreement was likely in the next few weeks. This confirms our view that a no-deal Brexit is an unlikely outcome and that Sterling has been excessively punished in the last few weeks.

The focus this week will be on inflation data out Wednesday, given the Bank of England has made it clear that further hikes are dependent on its expectations for future inflation.

EUR

As fears of a confrontation over the Italian budget recede, markets are beginning to accept that the ECB will in fact taper its purchases of sovereign bonds according to schedule, and that hikes will be forthcoming some time in the second half of next year. The ECB confirmed this outlook with somewhat hawkish communications in last week’s meeting. President Draghi struck a confident note both on growth and on the prospects for inflation to return to its target over the next few months.

We look to Friday’s flash PMI data to confirm that the economic expansion in the Eurozone remains on track, though we see no sharp moves in the EUR/USD rate until more clear signs emerge of an upward trend in Eurozone inflation.

USD

The budding rally in US Treasury yields that started after the strong employment print was temporarily cut short by lower-than-expected inflation data. Data out of the US this week is relatively scarce, dominated by second-tier indicators like housing sales.

Consequently, Dollar trading will likely be driven primarily by headlines on the various trade conflicts and news from elsewhere. It was announced over the weekend that Donald Trump intends to follow through with tariffs on $200 billion worth of Chinese goods, albeit at a lower rate than originally planned following recent talks.