Following last week's economic data, market analysts are anticipating further rate hikes from the Bank of England. A 0.25% increase in rates is fully expected in May, with the projected peak now raised to nearly 5% later this year, which is likely to have a negative impact on UK market sentiment.

Inflation remains a concern, with headline inflation disappointing at 10.1%, and average earnings higher than expected at 5.9% or 6.6% excluding bonuses. This has contributed to the ongoing squeeze on disposable income.

Last week's retail sales figures showed a year-on-year drop of 3.1%. Meanwhile, in the US, the Fed is also expected to raise rates by 0.25% next month, with the consensus view being that this would be the peak, and rate cuts may be needed later this year as the focus shifts from inflation to growth.

The European Central Bank is currently the most hawkish, having started the tightening cycle later and from a lower base. Further rate increases are expected in the coming months as the bank remains fully focused on the challenging inflationary outlook.

Although sterling has been the best performing G10 currency this year, concerns about the UK economic outlook have overshadowed the repricing of UK rate hikes this week. GBP/USD remains close to its recent highs towards 1.2500, largely driven by a weaker dollar with US interest rates expected to peak first.

With a relatively quiet data calendar this week, the upcoming central bank meetings will be the main focus.