With interest rate decisions out of both the UK and US this week, central banks understandably took the spotlight. However, ongoing global tensions and tariff negotiations continued to dominate the broader theme. Despite the busy news cycle, markets experienced a period of consolidation following an extended stretch of extreme volatility. As a result, even these high-profile interest rate decisions brought only limited market movement.

The UK observed a bank holiday on Monday for May Day, leaving the US to deliver the first major data point of the week with the ISM Services PMI. While forecasts had anticipated a modest decline from 50.8 to 50.2, the final reading surprised to the upside at 51.6. Not only did this surpass expectations, but it also pushed the figure well above the key 50.0 level, indicating expansion in the services sector.

Attention then turned to Wednesday evening, when the Federal Reserve announced its latest interest rate decision. Amidst pressure from President Trump to begin cutting rates, all eyes were on whether the Fed would respond. Ultimately, the Fed held rates steady as expected, a decision that was largely priced into the markets, resulting in limited volatility.

On Thursday, it was the Bank of England’s turn. A 25-basis-point rate cut had been widely anticipated, with forecasts suggesting a unanimous 9-0 vote in favour. However, two members voted to hold rates at 4.5%, introducing an element of surprise that triggered some market volatility, particularly against the euro. The announcement of a UK-US tariff deal further strengthened the pound as we head into the weekend.

Looking ahead, next week brings several key data releases. In the UK, we’ll see the Claimant Count Change on Tuesday and GDP data on Thursday, both of which have the potential to move markets. Over in the US, attention will turn to CPI on Tuesday and retail sales figures on Thursday, both key indicators for inflation and consumer strength.