The latest UK headline inflation rate of 10.1% fell more than expected, yet disposable incomes remain under pressure despite a robust job market, as average earnings rose by a higher than expected 6.7%. However, retail sales figures released today were much stronger than anticipated.

Although there is conflicting data, most analysts predict the Bank of England will increase interest rates by 0.25% next month, despite another critical set of data releases before the March 23rd decision. The committee will likely pause and evaluate the impact of aggressive rate tightening on the underlying economy.

In the US, inflation dropped to 6.4%, slightly higher than expected, which raises concerns for the Fed. However, retail sales were much stronger, suggesting that further rate increases are likely in the coming months, potentially leading to higher rates for a longer period.

The EU's economic outlook improved as the European Commission upgraded its forecast for the year. ECB President Lagarde also reiterated the intention to raise rates by 0.50% in March, as they remain hawkish, with inflation dominating the narrative.

Market uncertainty and the lack of momentum or conviction in any real trend was evident in the somewhat muted reaction to this week's critical data releases.

GBP/USD broke below the psychological 1.2000 level, with 1.1750 being the next significant support, after failing at the pivotal 1.2500 topside barrier. GBP/EUR remains within the well-established range of 1.1000 - 1.1500.