UK Data
- Monday 9.30am PPI Input & Output Prices for May. Previous 23.1%y/y & 7.5%y/y
- Tuesday 12.01am RICS Housing Survey for May. Previous -95.1 index
- Tuesday 9.30am Industrial Production for April. Previous -0.5%m/m & 0.2%y/y
- Tuesday 9.30am Manufacturing Production for April. Previous -0.5%m/m & 0.6%y/y
- Wednesday 9.30am Average Earnings for April. Previous 4.0% 3m Avg
- Wednesday 9.30am Claimant Count for May. Previous 7.2k
Sterling slumped to a 2-week low against the Euro and the Dollar last week as the gloomy outlook for the UK economy pervaded. The Pound stumbled on Monday after Bradford & Bingley, the UK’s largest buy-to-let mortgage lender saw a quarter wiped off its share price after issuing a profit warning on the state of the UK mortgage market. Meanwhile, British manufacturing activity failed to grow in May for the first time in 3 years, while service sector activity contracted for the first time in 5 years. Sterling extended losses on Thursday after the Bank of England’s MPC left interest rates unchanged at 5.0% as expected, with room for manoeuvre severely limited by intense inflationary pressures and bleak prospects for economic growth. Monday’s pipeline inflation data is likely to be the highlight of the week, with expectations for another record high.
US Data
- Thursday 1.30pm Retail Sales for May. Previous -0.2%m/m
- Friday 1.30pm CPI for May. Previous 0.2%m/m & 3.9%y/y
- Friday 2.55pm University of Michigan Sentiment Survey (Preliminary) for June. Previous 59.8 index
The Dollar received a welcome boost last week after Ben Bernanke, chairman of the Federal Reserve, issued a rare warning over the inflation impact of a falling Dollar. Bernanke said, in collaboration with the US Treasury that the Central Bank continued to “carefully monitor” developments in foreign exchange markets. He noted the falling Dollar had contributed to an unwelcome rise in import prices and thus consumer price inflation. It was the first time Mr Bernanke had openly acknowledged that the value of the Dollar should be factored into the Fed’s policy making process. However, the Dollar gave back previous gains on a higher oil price and mixed employment report on Friday. Although data showed fewer people lost their jobs last month than expected, the US unemployment rate jumped to 5.5%. The acceleration from April’s 5.0% was the sharpest jump in 22 years, taking unemployment to a 3 and a half year high. The market will be watching CPI data this week following Bernanke’s comments, for any indication of monetary bias going forward.
EURO Data
- Thursday 10.00am Industrial Production for April. Previous -0.2%m/m & 2.0%y/y
The Euro closed up last week against both the Pound and the Dollar despite increasing signs of slowing Eurozone economic growth. Both Eurozone manufacturing and service sector PMI data slipped to record lows in May, underlying the region’s spluttering growth as companies suffer from a stronger Euro and oil price. Meanwhile, retail sales declined more than expected in April, dragged lower by poor figures in Germany, the Eurozone’s largest economy. However, the Euro erased losses on Thursday after the European Central Bank hinted that it could raise interest rates as soon as next month. The news came in the accompanying press conference following the decision to keep interest rates on hold in June at 4.0%. Jean-Claude Trichet, ECB president maintained his persistent hawkish rhetoric saying the Bank was in a “heightened state of alertness” because of rising inflationary pressures in the Eurozone. In a quiet week for the Eurozone, market attention will be diverted to external events.
Interest rate outlook
| 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 |
25th June |
| EU (ECB) |
4.00% |
+25bps |
06/06/07 |
3rd July |