Following a prolonged period of volatility, financial markets appear to have entered a consolidation phase, with rates across the board remaining relatively stable. This stabilisation coincides with a quieter week for President Trump after a recent surge of geopolitical developments.
The US released the first major economic data of the week on Monday, with the latest retail sales figures. Forecasts had anticipated an increase from the previous, significantly negative reading of -1.2% to 0.6%. However, actual figures fell short of expectations, registering a modest 0.2%. This underperformance further indicates potential weaknesses in the US economy. On a more positive note, core retail sales aligned with expectations, rising from -0.6% to 0.3%.
The next major economic release came on Wednesday, once again from the US. With interest rate decisions pending in both the US and the UK, central bank policies dominated the economic calendar. As widely anticipated, the Federal Reserve maintained its current interest rate levels. However, the Fed also downgraded its growth expectations for the US economy, which briefly strengthened the GBP against the USD.
On Thursday, attention shifted to the BoE, which was set to announce its latest interest rate decision at midday. Prior to that, the UK released its latest Claimant Count Change figures. Forecasts had projected an increase to 7.9k from the previous reading of 2.8k; however, the final figure came in significantly higher at 44.2k. This substantial rise comes at a time when welfare spending remains a highly scrutinized topic.
Later in the day, as expected, the BoE opted to hold interest rates steady. The voting pattern of 0-1-8 (compared to forecasts of 0-2-7) indicated a slightly more unified stance on the decision. Market reaction remained muted, as the outcome had already been largely priced in. Given the increasing transparency of central banks regarding potential rate cut paths, market movements are becoming more predictable. However, any deviation from expectations could still trigger significant market swings.
As we look forward to the upcoming week, several key events could impact financial markets. Notable releases include PMI data for the UK, US, and Eurozone, the UK Budget announcement, and the latest US GDP figures. Investors will be closely monitoring these developments for further indications of economic strength or weakness across major economies.
