The economic backdrop remains resilient, but central banks are not ready to declare victory over inflation.

Let's start with the data.

The United States continued to show strength.

Retail Sales beat expectations, with Core Retail Sales rising 0.8% m/m and headline Retail Sales increasing 0.9%.

The labour market also remained healthy.

Unemployment Claims came in broadly unchanged at 226K, while the Philly Fed Manufacturing Index held firmly in expansion territory at 10.3.

Consumer confidence improved as well.

University of Michigan Sentiment rose to 48.9 from 44.8, while inflation expectations eased from 4.8% to 4.6%.

• Consumers are still spending
• Growth remains positive
• Inflation expectations are stabilising

The UK delivered mixed signals.

Headline CPI held at 2.8%, but labour market data weakened, with Claimant Count Change rising sharply to 31.2K.

At the same time, Average Earnings remained elevated at 4.4% and Retail Sales rebounded strongly by 1.2%.

Growth is slowing, but not collapsing.

Elsewhere, central banks remained cautious.

The Federal Reserve held rates at 3.75%.

The Bank of England held at 3.75%, although two members voted for a cut, signalling increasing debate about the policy outlook.

The Bank of Japan raised rates to 1.00%, continuing its gradual normalisation process.

This week's COT report is unavailable due to the Juneteenth holiday.

That leaves price action and economic data as the primary guide to sentiment.

• Growth → resilient
• Inflation → easing gradually
• Policy → restrictive
• Sentiment → improving

That creates an interesting backdrop.

Falling oil prices are reducing inflation pressure.

Economic activity remains positive.

But policymakers remain reluctant to signal easier policy.

Looking ahead, next week becomes critical.

• Canadian CPI
• European PMIs
• UK PMIs
• US PMIs
• Australian CPI
• Australian Employment
• US Core PCE
• US GDP
• Tokyo CPI

Can inflation continue cooling without growth rolling over?

If it can, markets have a strong case for extending the rally.

If inflation proves sticky again, central banks may remain restrictive for longer than investors expect.

So while the geopolitical picture has improved and growth remains resilient, the policy challenge remains.

Inflation is easing.

Growth is holding.

Central banks remain cautious.

And next week's inflation data may determine which narrative wins.