Fed Under Pressure to Hike Amid Rising Energy Costs and Hawkish ECB

This week's economic data was overshadowed by geopolitical events and earnings announcements.

The conflict in the Middle East escalated, leading to concerns about energy supplies and rising inflationary pressures. As a result, central banks are under increasing pressure to tighten monetary policy. The odds of the Federal Reserve hiking interest rates by the end of the year rose to over 90%, with markets pricing in a rate hike as soon as September.

The European Central Bank's (ECB) decision to hold rates steady was seen as hawkish, paving the way for further rate hikes. ECB President Christine Lagarde suggested that policymakers are considering raising rates at the September meeting. The EURUSD broke below 1.1400 following the decision and fell to lows not seen since June.

Meanwhile, UK inflation fell to a six-year low of 2.6%, while core inflation remained unchanged. This has led investors to expect the Bank of England (BOE) to hold rates unchanged through the rest of the year. However, with energy prices on the rise, some analysts are warning that this could change.

The week ahead is expected to be busy, with rate decisions from the Fed, BOE, and Bank of Japan (BOJ). Markets will also be watching for Q2 GDP figures from the US and Eurozone. With tensions in the Middle East still high, geopolitical events could continue to drive market sentiment.