UK Data
- Tuesday 9.30am CPI for May. Previous 0.8%m/m & 3.0%y/y
- Wednesday 9.30am BoE release minutes of prior (4-5th June) MPC meeting
- Wednesday 11.00am CBI Industrial Trends for June. Previous -10.0% bal
- Thursday 9.30am Retail Sales for May. Previous -0.2%m/m & 4.2%y/y
Sterling hit a four week low against the Dollar last week on an unhealthy mix of slowing growth and higher inflation. Sterling initially rose on Monday after data revealed UK factory gate inflation hit a new record high in May, putting pressure on the Bank of England not to cut interest rates. Annual factory gate inflation rose to 8.9%, the fastest rate in more than 20 years as widespread increases in the cost of raw materials gave no let-up in inflationary pressures. Meanwhile, annual input prices surged to 27.9% also a new record driven by the latest price rises for oil, food and imported materials. The Pound then sank after the number of people claiming unemployment benefit rose for a fourth consecutive month, providing further evidence that the stuttering UK economy has begun to affect the jobs market. Meanwhile, a tougher outlook for jobs also seems to be keeping a lid on pay growth in spite of sharply rising food and energy costs. This week’s focus is Tuesday’s May CPI, expected to rise further, prompting an explanatory letter from BoE Governor Mervyn King to the Chancellor.
US Data
- Monday 1.30pm Empire State Survey for June. Previous -3.2 index
- Monday 2.00pm Treasury International Capital System (TICS) for April. Previous $80.4bn
- Tuesday 1.30pm Building Permits for May. Previous 982.0k
- Tuesday 1.30pm Current Account for Q1. Previous -$172.9bn
- Tuesday 1.30pm Housing Starts for May. Previous 1032.0k
- Tuesday 1.30pm PPI for May. Previous 0.2%m/m & 3.0%y/y
- Tuesday 2.15pm Industrial Production for May. Previous -0.7%m/m
- Thursday 3.00pm Philadelphia Fed Survey for June. Previous -15.6 index
The Dollar rose sharply against the Euro and the Pound last week on further hawkish rhetoric from the Federal Reserve raising expectations for higher US interest rates. A roll-call of top senior US officials threw their weight behind the US currency in an attempt to halt the decline of the greenback, prompting a wave of Dollar buying. Meanwhile, US retail sales rebounded at twice the rate expected in May as consumers began spending tax rebate cheques, raising hopes that the world’s largest economy may avoid recession. The Dollar extended gains on Friday after soaring energy prices helped drive US consumer prices higher in May by the fastest rate since November, bolstering the attractiveness of Dollar-denominated assets. This week’s US data should sustain the picture of rising inflationary risks with Tuesday’s May PPI set to surprise on the upside.
EURO Data
- Monday 10.00am HICP (Final) for May. Previous 0.3%m/m & 3.3%y/y
- Tuesday 10.00am German ZEW Survey (Economic Sentiment) for June. Previous -41.4
- Tuesday 10.00 Trade Balance (nsa) for April. Previous €-2.3bn
The Euro reached a one month low against the Dollar last week after the ECB dampened down speculation of a series of interest rate rises. Comments from various ECB governing council members sought to correct some in the financial markets that a potential rise in Eurozone interest rates next month was likely to be a one-off. The single currency stumbled across the board on Friday after Irish voters were seen as having rejected EU reforms in a referendum, raising the possibility of political instability in the region. Ireland was the only one of the EU’s 27 member states to have a referendum on the Lisbon treaty, aimed at streamlining its institutions. This week’s focus will be Monday’s final HICP figure, while Tuesday’s ZEW survey is expected to edge lower.
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 |