Financial news last week was dominated by a sharp sell-off in bond markets around the world.<\/p>\n
Key points:<\/strong><\/p>\n \u27a2 Polish data raise concerns \u2014 growth disappoints while inflation rises. Bondholders were unsettled by a combination of factors: the prospect of energy prices remaining higher for longer, evidence of second-round inflation effects, and political instability in countries such as the United Kingdom. More difficult to quantify, but still present in the back of every investor\u2019s mind, are the lack of progress in reducing deficits in developed economies and the prospect of never-ending issuance of new debt securities \u2014 a trend exacerbated everywhere by demographics.<\/p>\n Equities have remained relatively resilient in the face of the sharp rise in yields. Currencies, however, have not. All major currencies weakened against the dollar, with the British pound and the Brazilian real performing particularly poorly due to domestic political difficulties.<\/p>\n The macroeconomic calendar for this week is relatively light. This means that observing the market\u2019s reaction to the bond sell-off may prove instructive: will bonds find a bottom and rebound, or will the sell-off continue in the absence of fresh news? Attention this week will focus on the global release of PMI business activity indicators on Thursday, 21 May. From the United Kingdom, labour market data will be published on Tuesday, 19 May, followed by inflation data on Wednesday, 20 May. The most important issue, however, will remain the uncertain future of Prime Minister Keir Starmer.<\/p>\n
\n\u27a2 The USD strengthens against other major currencies amid a global bond market sell-off.
\n\u27a2 Following high inflation readings in the US, markets are pricing in a Fed rate hike in 2026.
\n\u27a2 The war in Iran continues, with the parties failing to negotiate an agreement on the key disputed issues.
\n\u27a2 Andy Burnham becomes the favourite to become prime minister, while the UK bond market suffers heavy losses.<\/p>\n