UK Data
- Thursday 9.30am Retail Sales for April. Previous -0.4%m/m & 4.6%y/y
- Thursday 11.00am CBI Industrial Trends for May. Previous -13.0% bal
- Friday 9.30am GDP for Q1 (Preliminary Estimate). Previous 0.4%q/q & 2.5%y/y
Sterling sank to a 3-month low against the Dollar on Wednesday after the Bank of England’s Quarterly Inflation Report painted a gloomy picture for the UK economy in the months ahead. The report highlighted that the Bank’s outlook for inflation had deteriorated somewhat since its last report in February, reflecting higher energy and food prices in particular. BoE Governor Mervyn King said that inflation could reach as high as 4% in the second half of 2008 and remain above 3.0% for a number of months, “a level requiring a number of explanatory open letters to the Chancellor”. Meanwhile, the Bank pointed to further moderation in UK economic growth, citing sluggish real income growth and tighter credit conditions, coupled with dampened domestic demand and falling property prices. Market attention now shifts to Wednesday’s BoE’s MPC minutes and Thursday’s retail sales.
US Data
- Tuesday 1.30pm PPI for April. Previous 1.1%m/m
- Wednesday 7.00pm Fed release minutes from prior (29-30th Apr) FOMC meeting
- Friday 3.00pm Existing Home Sales for April. Previous 4.9mln
The Dollar initially strengthened against the Euro and Pound last week as core US retail sales, excluding the hard pressed auto sector surprisingly rose by 0.5%m/m. CPI for April came in at 0.2%m/m as energy prices held steady providing the Fed with some breathing space to keep interest rates low to stave of economic slowdown. However, the Dollar re-traced gains after US industrial production suffered its biggest fall in 3-years and US consumer confidence fell to its lowest level in 28-years. In a quiet week for US data, the highlight should be the minutes from the April FOMC meeting on Wednesday.
EURO Data
- Tuesday 10.00am German ZEW (Economic Sentiment) Survey for May. Previous -40.7 index
- Wednesday 9.00am German IFO (Business Sentiment) Survey for May. Previous 102.4 index
- Thursday 10.00am EU Industrial New Orders for March. Previous 0.6%m/m
- Friday 9.00am Manufacturing PMI (Flash Estimate) for May. Previous 50.8 index
- Friday 9.00am Services PMI (Flash Estimate) for May. Previous 51.8 index
The Euro advanced across the board last week, after figures revealed Eurozone growth rebounded more than expected in Q1, thanks mainly to a strong performance in Germany. GDP rose 0.7% in the first quarter of 2008 for a 2.2%y/y rise. The data suggested that the Eurozone economy was holding up well in the face of a potential global slowdown, encouraging the ECB to leave interest rates on hold. Eurozone inflation was confirmed at 3.3%y/y, easing from a previous 3.6%, however this is still well above the ECB’s target of just below 2% and the global inflation situation suggests we have not seen the peak yet. This week’s data calendar focuses strongly on German sentiment, with both the ZEW and IFO surveys expected to post moderate falls.
Interest rate outlook
| Country |
Current rate |
Last change |
Date of change |
Next meeting |
| UK (MPC) |
5.00% |
-25bps |
10/04/08 |
5th June |
| US (FED) |
2.00% |
-25bps |
30/04/08 |
25th June |
| EU (ECB) |
4.00% |
+25bps |
06/06/07 |
5th June |