UK Data
- Monday 12.01am Rightmove House Price Index for July. Previous 0.1%y/y Actual -2.0%y/y
- Wednesday 9.30am BBA Mortgage Approvals for June. Previous 28.0k
- Wednesday 9.30am BoE release minutes of prior (9-10th July) MPC meeting
- Thursday 9.30am Retail Sales for June. Previous 3.5%m/m & 8.1%y/y
- Friday 9.30am GDP (First Estimate) for Q2. Previous 2.3%q/q & 2.5%y/y
Sterling edged higher against the Dollar and the Euro last week after a bigger than expected jump in UK inflation, dampened any expectations of near-term interest rate cuts. Consumer price inflation leapt to 3.8%y/y in June from 3.3% in May, with rises in the cost of food and petrol taking the annual rate to nearly double the BoE’s target. Meanwhile, factory gate inflation reached its highest annual rate on record last month, as the surge in oil prices took manufacturers’ costs to 30% above their level a year earlier. However, Sterling erased gains later in the week after UK unemployment jumped last month by its fastest rate since 1992 in a deepening UK economic downturn. Claimant count unemployment rose by 15.5k in June, while average earnings growth eased in May, in a sign that higher living costs have yet to feed through into wages. In light of the worse-than-expected inflation data, the July Bank of England MPC minutes take centre stage this week, with minimal scope for policymakers opting for a rate cut other than David Blanchflower.
US Data
- Thursday 3.00pm Existing Homes Sales for June. Previous 4.99mln
- Friday 1.30pm Durable Goods Orders for June. Previous 0.0%m/m
- Friday 2.55pm University of Michigan Sentiment Survey for July. Previous 56.6 index
- Friday 3.00pm New Home Sales for June. Previous 512k
The Dollar fell to record lows against the Euro last week, as optimism about the government’s rescue plan for the country’s ailing mortgage agencies faded and a black mood set in. The Dollar had pulled back from a three-month low on Monday after the rescue plan was announced but buckled under the pressure of a global equity sell-off as fears about regional bank failures persisted following IndyMac’s demise a fortnight ago. However, the greenback later reversed course after oil prices fell below $130 per barrel and some of the biggest US banks posted better-than-feared results, brightening the mood towards the fragile sector. In a light US data calendar this week, we can expect further weakness in both new and existing home sales for June, while consumer sentiment is forecast to remain at near 28-years lows.
EU Data
- Wednesday 10.00am EU Industrial New Orders for May. Previous 2.5%m/m & 11.7%y/y
- Thursday 9.00am German IFO Business Sentiment Survey for July. Previous 101.3 index
- Thursday 9.00am Current Account (nsa) for May. Previous -€9.2bn
- Thursday 9.00am Manufacturing PMI (Flash Estimate) for July. Previous 49.1 index
- Thursday 9.00am Services PMI (Flash Estimate) for July. Previous 49.5 index
The Euro closed lower against Sterling and the Dollar last week as disappointing economic data and weak sentiment weighed on the single currency. Eurozone industrial production recorded its biggest monthly drop for almost 16 years in May, providing the latest evidence of a significant slowdown across the 15-nation region. Meanwhile, German investor confidence plunged to its weakest level for almost 17-years, highlighting the fears of an economic slowdown. The ZEW survey suggested Germany faces a serious risk of recession as high inflation, higher interest rates and the strong Euro begin to bite. Market attention now shifts to Thursday’s July data set, with the German IFO survey and Eurozone flash PMI’s all expected to deteriorate further.
Interest rate outlook
| Country |
Current rate |
Last change |
Date of change |
Next meeting |
| UK (MPC) |
5.00% |
-25bps |
10/04/08 |
7th August |
| US (FED) |
2.00% |
-25bps |
30/04/08 |
5th August |
| EU (ECB) |
4.25% |
+25bps |
03/07/08 |
4th September |