First the GBP, then the EUR, rallied on inflation worries (top middle and top left charts). In the UK, high inflation prompted speculation that interest rates will have to rise; in the Eurozone, comments by Jean-Claude Trichet about the ECB’s concern about inflation and preparedness to hike interest rates sparked the rally. Whether you think these banks will hike rates is not the issue. The fact is, the probability of rate hikes has increased and the markets have priced it in.

I have completely failed to play this trend, and now I fear it is too late and am out of the markets. Why did I make such a bad mistake? Because I was inflexible. I clung to my view that neither central bank will raise rates this year — which I still hold — and did not see that the markets were reacting to the news-breakout about inflation. Lately I have been spending too much time trying to work out what should happen, and not enough time listening to the markets — which is supposed to be a fundamental part of my process. 
Consequently, I am going to spend more time looking at the charts, and more time (in the evening) chewing over the market action.
Update: Back in December, I said this:

Since 2007, I have thought that every inflation scare and expectation of rate hikes was nonsense. At my previous job, we were putting on trades to benefit from low rates in December 2010 in early 2009. Now I am concerned that my beliefs have been hardened by success — there will be a tightening cycle one day, and I hope I will be able to see it coming.

This latest episode does not augur well for seeing the change coming. Seeing a risk is half the battle — but only half.