UK Data
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During the week Halifax House Prices for June previous -2.4%m/m & -3.8%y/y
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Monday 9.30am Industrial Production for May previous 0.2%m/m & 0.2%y/y
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Monday 9.30am Manufacturing Production for May previous 0.1%m/m & 0.1%y/y
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Wednesday 9.30am Trade Balance for May previous -£7.59bn
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Thursday 12.00pm BoE MPC Interest Rate Announcement
After hitting a two-month high of just above $2 earlier last week, Sterling retreated against the greenback after a string of weak economic data painted a bleak picture for the UK economy. Britain’s dominant services sector continued to buckle under pressure from rapidly rising costs and weakening demand in June, with activity declining at its sharpest rate since the aftermath of the 9/11 attacks. Reflective of surging oil prices, inflationary pressures intensified at a record pace, contributing to net job cuts as companies lost confidence in the economic outlook. The UK manufacturing sector faired little better, contracting at its fastest rate since December 2001 as output and new orders fell at their fastest rate in a decade. Meanwhile, the Pound extended losses as tumbling UK housing shares and a profit warning from Marks & Spencer, the bellwether UK retailer cast further doubt over Britain’s already slowing economy. Thursday’s BoE interest rate announcement takes centre stage this week, with the market anticipating the MPC will sit tight for a third month running in light of soaring inflation and slowing economic growth.
US Data
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Tuesday 3.00pm Pending Home Sales for May previous 6.3%m/m
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Friday 1.30pm Import Prices for June previous 2.3%m/m
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Friday 1.30pm Trade Balance for May previous -$60.9bn
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Friday 2.55pm University of Michigan Sentiment Survey (Preliminary) for July previous 56.7
We saw a resurgent Dollar last week after US payrolls data suggested the jobs market had not deteriorated as much as many had expected, providing some much needed optimism towards the outlook of the US economy. Non-farm payrolls fell by 62k only slightly more than the 60k expected and in line with the upwardly revised 62k jobs shed in May. However, the unemployment rate remained at 5.5% in June, confounding expectations for a slight fall, as many had hoped that the previous month’s sharp uptick (the fastest for 22-years) was in part a statistical blip. This week’s US data calendar is a little on the light side, with the market looking for any signs of a meaningful recovery in the housing market and further inflationary pressures via import prices.
EU Data
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Wednesday 10.00am EU GDP (Final) for Q1 previous 0.8%y/y & 2.2%y/y
The Euro sold off aggressively last week after the European Central Bank signaled that it may have come to the end of its monetary policy tightening cycle. The single currency had rallied to a 10-week high against the Dollar earlier in the week as surging inflation encouraged investor to price in a series of rate hikes. Eurozone CPI leapt to an all-time high of 4.0%y/y, twice as high as the ECB’s inflation target of below but “close” to 2.0% while pipeline inflationary pressures remained rampant. However, the Euro plunged on Thursday afternoon, shortly after the ECB raised interest rates by 0.25% to 4.25% as Jean-Claude Trichet, ECB President stuck a more dovish tone than expected in the post-decision press conference. Trichet said “the current monetary policy stance will contribute to achieving price stability”, confirming the Bank had moved to a neutral bias and quashing expectations for further hikes. This week’s quiet data calendar has little market moving potential, with attention shifting to scheduled speeches from various ECB Governing Council members.
| Country |
Current rate |
Last change |
Date of change |
Next meeting |
| UK (MPC) |
5.00% |
-25bps |
10/04/08 |
10th July |
| US (FED) |
2.00% |
-25bps |
30/04/08 |
5th August |
| EU (ECB) |
4.25% |
+25bps |
03/07/08 |
4th September |