Data from the Office for National Statistics (ONS) showed that the UK economy expanded by 0.1% during the first quarter of 2023, which was in line with economist estimates. The data also showed that the UK economy shrank by 0.3% during March, suggesting significant weakness towards the end of the quarter. Data from mortgage lender Halifax showed that house prices resumed their decline during April, with a fall of 0.3%.

The Bank of England (BoE) hiked interest rates by a further 0.25% last week, bringing the headline base rate to 4.5%. The central bank revised their inflation forecasts higher, with consumer price inflation expected to be 5.1% by the end of 2023.

Various senior figures from the European Central Bank (ECB) made hawkish remarks last week. The ECB President, Christine Lagarde, told reporters that the central bank still has “more ground to cover” and that there could be significant upside risks to the inflation outlook. The chief ECB economist, Philip Lane, stated that inflation in the Eurozone still has a lot of momentum, whilst ECB board member Isabel Schanbel said the central bank will keep hiking rates until core inflation subsides.

Swedish property company SBB saw their share price decline by 42% across the week, after postponing a dividend payment amidst a 15% decline in house prices in Sweden. S&P Global Ratings cut the company’s credit rating to junk status, with growing uncertainty surrounding SBB’s balance sheet.

Official data showed that consumer prices rose by 4.9% in the year to April, slightly lower than the 5% expected by economists. Core inflation, which excludes food and energy prices, came in at 5.5%. Inflation appears to be in a downward trend in the US, with headline CPI now significantly lower than it is in the UK or the Eurozone.

Debates between Joe Biden’s administration and officials in the House of Representatives regarding the US debt ceiling continued throughout the week, with no clear resolution in sight yet. The Treasury Secretary and former Federal Reserve chief, Janet Yellen, said that choices would have to be made with regard to government spending if lawmakers don’t act to raise the debt ceiling quickly.

Economic data in China pointed to an unstable recovery, with weak consumer demand contributing to consumer prices rising at their slowest pace for 2 years. The Chinese central bank reported that bank lending was much weaker than expected in April, suggesting a cautious mood amongst Chinese households and corporations. The weak data prompted renewed calls for further monetary stimulus measures.

The newly appointed Bank of Japan (BoJ) governor, Kazuo Ueda, stated last week that the central bank may look to end their yield curve control programme and embark on some form of quantitative tightening, once the BoJ is confident that sustainable and stable inflation of 2% will be achieved. Ueda casted doubt on how long inflation will remain above 2% if wage growth remains relatively subdued.

Treasury yields fell during the middle of the week as data showed that US inflation continued to slow during April and debt ceiling concerns flared up, however, yields moved higher as the week drew to a close.

GBP / EUR – Current 1.1478 Previous 1.1463

The US Dollar rallied against most major currencies last week, resulting in the Pound falling by 1.41% against the greenback. Against the Euro, the pound was relatively stable, gaining 0.13% across the week.