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Sterling was a touch weaker against its major peers on Thursday, after recently appointed chancellor Jeremy Hunt unveiled large tax hikes and spending cuts during yesterday’s Autumn statement.

The news that markets had been desperately hoping for finally arrived last week.

After a strong start, Thursday was a torrid day for the dollar, which collapsed against its peers following a much softer-than-expected US inflation print.

Currency market volatility continues to rise, and signs are emerging that the dollar rally is running out of steam.

The US dollar has been broadly stronger since the start of the week, as markets brace for another massive interest rate hike from the Federal Reserve this evening.

We believe that this week’s Bank of England meeting is one of the hardest to call for some time, and expect volatility in the pound to be elevated during either side of the decision.

Risk assets were steady to higher worldwide last week, as markets price in a modestly lower terminal rate from central banks and yields fall.

We think that this week’s Federal Open Market Committee meeting could be one of the most important in the current tightening cycle.

As expected, the European Central Bank raised all three of its main interest rates by 75 basis points on Thursday for the second time in as many meetings.

The main theme in the FX market this week has undoubtedly been US dollar weakness.

We expect another jumbo interest rate hike from the ECB this week, as it continues to play catch up to almost every other major central bank in the G10.

There is definitely a feel in FX markets that the dollar rally has run its course for now.