Another week ended with the markets facing more questions than answers. The UK appears to have good employment and retail sales whilst in a recession, with wages growing almost uncomfortably fast. When taken as a whole, the economic picture looks increasingly like one of stagflation. It also doesn't look like Prime Minister Sunak will get the improving economic conditions he was hoping for and will probably be forced to push the election back as far as it can go, possibly until December.

A quiet week was had by all last week, with currencies mainly on the sidelines as US equities hogged the headlines. New high upon new high with the S&P 500 breaking 5000 for the first time. With the strength shown by the last US Non-Farm payroll figures backed up by the most recent weekly figures, it seems onward and upward for the US economy without a care in the world.

Both the US Federal Reserve and the Bank of England disappointed the more optimistic players in the markets this week. The Bank of England was not as dovish as markets had been expecting and even had two members of the Monetary Policy Committee voting for a further 25bp hike. However, this was partly offset by the perma dove Swati Dhingra voting for a cut. It became clear that the bank would be as hesitant to cut as it was to hike. Indeed, it is difficult to see problems ahead when looking in the rear-view mirror.

Two down and two to go in the major central bank meetings we follow. Neither the Bank of Japan’s meeting last Tuesday nor the ECB’s on Thursday delivered any surprises. The BoJ maintained its steady-as-she-goes policy, and with Japan still recovering from the recent earthquake, this was entirely as expected. The market now goes back to one of its favourite games of trying to second guess when Governor Ueda will change policy; indeed, I was tempted by a bet that the BoJ will raise rates before any of the other central banks drop theirs. Tempting as it was to have a wager on that bet, the person offering the odds has a wiser head than I. 

Worldwide markets continue to row back from their expectations of an aggressive series of rate cuts this year as economies continue to show unexpected resilience, as does inflation. Last week, it was the UK's turn to serve an inflation surprise when December's CPI was reported to have bounced back. 

Despite central bank expectations and, indeed, wishes, inflation is far away from being dead and buried, and last Thursday's figures confirmed this when US CPI came in at 3.4%, above the market's best call; when taken in isolation, one set of figures doesn't set policy any more than one swallow doesn't make a summer.

Just when we all thought this year would be the year of the cut combined with lovely gentle markets, the US economy and geopolitics stirred us out of our post-festivities slumbers.

Just when you thought it was safe to relax and think about turkey and the upcoming festive season, the US Federal Reserve came along.

While last week was all about employment, this week it’s all about central banks, with the Fed, the BoE, and the ECB all set to meet over the coming days. More about that anon. Most of the currency market, except for the Japanese yen, marked time last week ahead of Friday’s Non-Farm Payrolls data, which was eventually announced were stronger than expected. The response was immediate with the dollar gaining roughly 1%.

The last month of the year has started, and certainly, there is a chill in the air in London, not on Wall Street, where stock markets had an excellent week. Indeed, US stocks had the second-best November since the 1980s. With interest rates seemingly at their peak in the US, traders' appetite for risk has returned with a vengeance, and all looks good for 2024 and beyond.