Following the craziness of the last two weeks and with little data to speak of, it was a slow start this week, with rates remaining relatively stagnant. With that being said, the fact that Sterling has held steady against its major competitors could be seen as a win as we head into the lead-up to the next Bank of England interest rate decision (11TH May 12pm BST). UK inflation data caused a stir, with CPI coming in at 10.1% versus forecast of 9.8%, putting renewed pressure on the Bank of England to act. The bank is now expected to raise another 70bp by the end of the year, which is in stark contrast to the Fed who we are now anticipating to start cutting their rates in the next few months. Yesterday’s poor US unemployment claims will add fuel to this rumour, even though Fed speakers have indicated this week that they are expecting one further hike to come.

Early this morning saw UK retail sales come in worse than forecast at -0.9% versus the expected -0.5%, causing a sell-off with the Pound dropping off against both EUR and USD. This result is a contrast to the CPI figures mentioned earlier and once again highlights the difficult job ahead for the Bank of England as they try to juggle inflation and tightening economic conditions. PMI Friday is here once again as well, with it giving us the latest insight into how the manufacturing and services industries are holding up following a year of intensive rate hikes. With the services industry expanding for all three of them in the last reading, all eyes were on today’s print to see whether services had managed to hold up. German and French services sectors posted strong figures, whilst their manufacturing figures contracted once again, coming in worse than expected.

We now find ourselves in a form of economic purgatory as we await the switch between inflation and economic health becoming the main focal point of the central bank’s policies. Of course, the increasingly hot political situation in the world could change any plans in an instant. China and the US seem to be using the Ukraine-Russia (which shows no signs of slowing down) to reposition themselves on the global stage. It will be interesting or scary, depending on the way you view it, to see how this develops over the next few months.