Last Wednesday, Jay Powell and his team delivered a slightly more hawkish message than some traders had expected as they pushed the prospect of sustained easing into next year. In particular, they gave the French markets a good kicking after President Macron called for a snap election. His decision lays open the divisions within France and may well backfire on the incumbent and his Renaissance party. With political instability, an anathema to financial markets, we may have an uncomfortable few weeks ahead for the single currency.

Four of the G10 central banks have already delivered interest rate cuts, almost all being well-telegraphed. The ECB followed suit last week, cutting by .25%. However, Christine Lagarde was less than clear on the future path of rates, leaving this observer feeling that she may have some regrets over having boxed herself into this month’s rate cut.

After two holiday-shortened weeks, we return to a whole week of trading today and an interesting few days ahead. After Friday's PCE deflator came in slightly softer than expected, the dollar began to sell off from its recent levels and tested significant support levels on the dollar index.

Not unusually, Europe is out of step with the UK, with much of it shut to celebrate Whit Monday whilst we remain open today but shut next Monday. It is tempting to make puns with a holiday called Whit Monday, but I will avoid the groans and concentrate on more serious matters. The data out of the states last week was, as it has been recently, somewhat mixed, with the PPI numbers a little hotter than expected, whilst the CPI was a little softer.

The markets seem fixated on when the Federal Reserve will start to drop interest rates in the US. Certainly, Chairman Powell was slightly more dovish in his press conference after the FOMC meeting than many had anticipated. Some traders opined that Jay Po had had a sneak preview of last Friday's Non-Farm Payrolls figure, and after the number came in moderately weaker than analysts had predicted, this view gathered strength.

US PCE inflation index increases in March giving the FED much to ponder on the timing and extent of rate cuts in 2024. GBP has quietly strengthened over the past fortnight as tensions in the Middle East start to ease, subduing safe haven flows and underpinning the Pound.   The Bank of Japan draws a line in the sand, as early morning Yen price action looks suspiciously like intervention from the Central Bank of Japan.

From the data that the ONS released last week in the UK, we learnt that inflation, despite the Government’s wishes and claims, is still sticky, with services sticking around three times the BoE’s target level with the ongoing conflict in the Middle East damaging supply chains and looking potentially set to worsen the outlook for prices to stop rising looks bleak. Adding petrol to the flames of inflation is the increase in wages in the UK and annual hikes in such prices as state pensions and mobile phone bills.

Christine Lagarde didn’t disappoint the doves on the ECB when she gave the strongest hint possible that there will be a cut in interest rates for the Eurozone in June. This marks a change from Fed dependence to divergence by the ECB and of course comes with risks. After another stronger than expected CPI number in the States, the tenth in a row, expectations on the start of the Fed rate cutting cycle moved further out in the year and the predicted number of cuts continued to fall.

The phrase more questions than answers rather neatly sums up the current financial markets, with US data being the fulcrum of the conundrum. As if to underscore the issue, Jolts were subtly disappointing, as one analyst said, whilst last Friday's Non-Farm Payrolls beat all expectations. Fed officials are equally contradictory, but less and later, with regard to interest rate cuts, it seems to be the overriding message.

The plethora of central bank meetings last week at least delivered one cut in interest rates. The Swiss National Bank was the surprise outlier as it edged its rates lower by .25%, the first central bank to do so. It possibly jumped the gun as it holds quarterly meetings, and if it hadn’t moved now, it would have had to wait until June, which they perceived as being too long and now its odds on another cut then.