UK Data
- Monday 9.30am PPI Input & Output Prices for July. Actual 30.1%y/y & 10.2%y/y
- Monday 9.30am Trade Balance for June. Actual -£7.68bn
- Tuesday 12.01am RICS Housing Survey for July. Previous -88.0 index
- Tuesday 9.30am CPI for July. Previous 0.7%m/m & 3.8%y/y
- Wednesday 9.30am Average Earnings for June. Previous 3.8% 3m Avg
- Wednesday 9.30am Claimant Count for July. Previous 15.5k
- Wednesday 10.30am BoE Inflation Report
Sterling tumbled to its weakest level against the Dollar since November 2006 last week as persistently poor economic data provided further evidence that the UK is headed for a recession. The key industrial production index fell 0.2% in June as manufacturers were hit by muted domestic demand, soft export activity and elevated commodity prices. Moreover, the closely watched service sector PMI – the UK economy’s most dominant sector – rose slightly to 47.4 in July, but nevertheless indicated further contraction. Broad economic weakness prompted the Bank of England to hold interest rates steady at 5.0% on Thursday in a widely expected decision, given recent data showing falling house prices, rising unemployment and limited growth. This week’s highlight will be the publication of Wednesday’s Quarterly Inflation Report, with the overall tone expected to extend the view of limited manoeuvrability, as the BoE grapples with conflicting growth/inflation risks.
US Data
- Tuesday 1.30am Trade Balance for June. Previous -$59.8bn
- Wednesday 1.30pm Retail Sales for July. Previous 0.1%m/m
- Thursday 1.30pm CPI for July. Previous 1.1%m/m
- Friday 1.30pm Empire State Survey for August. Previous -4.9 index
- Friday 2.00pm Treasury International Capital System (TICS) for July. Previous $67.0bn
- Friday 2.15pm Industrial Production for July. Previous 0.5%m/m
- Friday 2.55pm University of Michigan Sentiment Survey (Preliminary) for August. Previous 61.2 index
The Dollar surged across the board last week, hitting a 5-month high against the Euro and as the market re-priced interest rate views amid signs the US slowdown was spilling over to the global economy. The greenback traded below $1.50 against the single currency for the first time since February, with oil prices tumbling below $115 per barrel, adding to the euphoria. Meanwhile, the Dollar showed limited reaction to the Federal Reserve’s decision on Tuesday to keep its main lending rate on hold at 2.0%, instead it was comments from the ECB acting as the catalyst for the move. In a busy data calendar, market attention now shifts to Wednesday’s retail sales figure as stimulus tax rebates begin to fade, while energy and food components are expected to keep Thursday’s CPI figure elevated.
EU Data
- Wednesday 10.00am Industrial Production for June. Previous -1.9%m/m & -0.6%y/y
- Thursday 10.00am Eurozone GDP (Flash Estimate) for Q2. Previous 0.7%q/q & 2.1%y/y
- Thursday 10.00am HICP for July. Previous 0.4%m/m & 4.0%y/y
The Euro took a battering last week after European Central Bank President, Jean-Claude Trichet highlighted increased risks to Eurozone growth. After holding interest rates steady at 4.25%, Trichet warned that third quarter growth would be “particularly weak”. This sparked talk that the ECB would be forced to abandon its hawkish policy stance and begin easing monetary policy, thereby weakening the single currency. This week’s focus will be Thursday’s preliminary GDP figure, with the Eurozone expected to slip into contraction in the second quarter as slowing global growth and high commodity prices weigh.
Interest rate outlook
| Country |
Current rate |
Last change |
Date of change |
Next meeting |
| UK (MPC) |
5.00% |
-25bps |
10/04/08 |
4th September |
| US (FED) |
2.00% |
-25bps |
30/04/08 |
16th September |
| EU (ECB) |
4.25% |
+25bps |
03/07/08 |
4th September |