UK Data
- Monday 12.01am Rightmove House Prices for August. Previous -2.0%y/y Actual -4.8%y/y
- Wednesday 9.30am BOE release minutes from prior (6-7th) MPC meeting
- Wednesday 11.00 CBI Industrial Trends Survey for August. Previous -8.0 index
- Thursday 9.30am Retail Sales for July. Previous -3.9%m/m & 2.2%y/y
- Friday 9.30am GDP (2nd Estimate) for Q2. Previous 0.2%q/q & 1.6%y/y
Sterling took a pummelling last week after the Bank of England delivered a gloomy assessment of the UK economy in its Quarterly Inflation Report. The Central Bank forecast a slowdown in UK economic growth, with Mervyn King, Governor of the BoE warning there was “bound to be a quarter or two” of economic contraction. Meanwhile, the report showed CPI spiking close to 5.0%, before falling sharply below the Bank’s 2.0% target in two years time. Markets interpreted the comments as dovish, indicating that the Central Bank’s concerns over inflation, which have stopped it from easing monetary policy, had waned. This saw expectations of the timing of UK interest rate cuts brought forward and punishing the Pound. This week’s focus falls on the publication of the August MPC minutes, likely to accentuate the BoE’s growing dovish stance followed by Thursday’s retail sales and Friday’s GDP figure, expected to paint worsening outlook for the UK economy.
US Data
- Tuesday 1.30pm Building Permits for July. Previous 1135k
- Tuesday 1.30pm Housing Starts for July. Previous 1066k
- Tuesday 1.30pm PPI for July. Previous 1.8%m/m & 9.2%y/y
- Thursday 3.00pm Philadelphia Fed Survey for August. Previous -16.3 index
The Dollar continued its impressive form last week, hitting a six-month high against the Euro as the economic slowdown outside the US gathered pace. Meanwhile, the greenback found support after US consumer prices rose by 0.8% in July, twice as fast as expected, dampening hopes that falling crude oil prices and slowing consumer demand would rapidly ease inflationary pressures. However, Dollar gains were capped somewhat after US retail sales fell 0.1% in July, recording their first drop in five months as the effect of the governments $100bn round of stimulus cheques began to wear off. A relatively quiet week for economic data should confirm further weakness in the US housing sector, while Tuesday’s July PPI figure is expected to match the disappointing rise in CPI last week.
EU Data
- Monday 10.00am Trade Balance (nsa) for June. Previous €2.3bn
- Tuesday 10.00am German ZEW (Economic Sentiment) for August. Previous -63.9 index
- Thursday 9.30am Manufacturing PMI (Flash Estimate) for August. Previous 47.4 index
- Thursday 9.30am Services PMI (Flash Estimate) for August. Previous 48.3 index
- Friday 9.00am Current Account (nsa) for July. Previous -€24.4bn
- Friday 10.00am Industrial New Orders for June. Previous -3.5%m/m
The Euro continued to slide across the board last week as figures on Thursday revealed Eurozone economic growth contracted in the second quarter, prompting fears of a recession. Gross domestic product within the 15-nation trading bloc shrank 0.2% from April to June, marking its worst quarterly performance since the launch of the single currency in 1999. The data prompted speculation that the European Central Bank would follow other leading Central Banks and abandon its hawkish monetary policy stance. In a busy week, Tuesday’s August ZEW survey is expected to move a leg lower, following on from downbeat consumer and business sentiment, while Thursday’s flash August PMI’s are forecast to edge further into contraction.
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 |