After another choppy week for European markets, a latter week rebound helped to ensure a modest gain, while the FTSE100 was able to recover some of the losses that had taken place over the previous two weeks.

Even US markets, which have seen sizeable losses over the last 3 weeks, managed to enjoy a brief respite, reversing the losses of the previous week, shrugging off heightened expectations of another 75bps rate hike by the Federal Reserve when they meet next week. This follow through effect has translated into a positive session in Asia and as such we should see a positive European open.

Fed chairman Jay Powell’s comments that the Fed was in no mood to dial back on its intention to hike rates by another 75bps has seen short term yields rise sharply to their highest levels since 2008, in part overshadowing a not insignificant 75bps rate rise from the ECB.

The rise in US yields has also been helped by continued resilience in US economic data, while a sharp rise in UK yields was aided by a sizeable new fiscal package announced by the UK government to protect consumers and businesses from surging energy prices.

European yields are also rising after Bundesbank President Joachim Nagel signalled that he wanted to see further rapid rate hikes in Europe, although what he wants and what the ECB can achieve are two different things entirely when yields on Italian bonds must be considered.

Last week we saw the US dollar set a 24 year high against the Japanese yen, and its best level against the pound since 1985, however despite these milestones, the greenback underwent a bit of a reversal, finishing the week lower, suggesting we might have seen a short-term peak.

The pound will be especially in focus this week, a week that will also have a profound effect on the national mood, as the UK undergoes a period of national mourning for Queen Elizabeth II, a sovereign who has been part of the fabric of UK society for over 70 years.

Not only has she left a deep and indelible mark on our national life, but also on our identity over the course of her reign, while navigating a period of seismic change both in the UK, but globally as well.

She will leave a lasting legacy not only in the UK, but also on the world stage, and will be sorely missed by millions of people, not only as a symbol and anchor of stability, but above all of service and duty. We shall never see her like again.

There are some who will look at the economic impacts this week of 10 days of national mourning at a time when the UK, and the whole of Europe is battling with an economic crisis, arguing perhaps that it is something the UK can ill afford, but that rather misses the point in the same way as the criticism of the 2-day bank holiday in June.

Life isn’t just about numbers on a spreadsheet, and it's not as if the economy can’t rebound in the same way it always has in previous instances.

Today’s, as well as this week’s economic numbers, will be a reminder of the challenges facing the UK economy in the face of the war in Ukraine, but these challenges are long term ones, and will be with us for a while.

The Bank of England has recognised this, postponing its widely expected decision to raise rates by a week until the 22nd September, the day after the Federal Reserve.   

So, while today’s economic data for July aren’t likely to be particularly encouraging, they are still expected to mark a rebound in economic activity from June.

Monthly GDP is expected to rebound 0.3%, from -0.6%, while the rolling 3-month measure is expected to edge back from -0.1% to 0.1%.

Similarly industrial production and manufacturing production are both expected to rebound by 0.3%, from -0.9% and -1.6% in June.

The latest unemployment and wages data for July out tomorrow, will also serve as a reminder of the challenges facing the country over the winter month, as well as the inflation numbers on Wednesday. These are expected to stabilise at 10.1% for August, and could edge a little higher, but with the fiscal measures announced by the government last week, we could well be near a peak.

The next few days and weeks are going to be important ones for the UK in a way that can’t be measured by numbers on a spreadsheet, or by an algorithm.  

The importance will be in terms of how the country is likely to see itself going forward, looking back over the last 70 years at a monarch who put service and duty first, and looking ahead to life with a new King, King Charles III.

EUR/USD – tested up to the 50-day SMA last week, before sliding back. Crucially we’re still below the down trend line from the highs this year and as such the bias remains to the downside. The 1.0120 remains a key resistance area. 

GBP/USD – despite slipping to its lowest level since 1985, at 1.1405 the pound finished the week higher, squeezing up to the 1.1650 before slipping back. This squeeze, if sustained could see a move back to the 1.1800 area. Below 1.1400 targets 1.1000. 

EUR/GBP – failed to overcome the June highs at 0.8720 two days in a row, slipping back to the 0.8640 area. A move below 0.8630 opens up the 0.8580 area.  

USD/JPY – fell back from the 145.00 area, arguing that we could have seen a short-term peak. This could be confirmed with a move below the 140.30 area. A move through 145.00 argues for a move towards the 1998 highs at 147.70.  

FTSE100 is expected to open 29 points higher at 7,380

DAX is expected to open 164 points higher at 13,172

CAC40 is expected to open 38 points higher at 6,250

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