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UK data
 

• Monday 11.00am CBI Distributive Trades Survey for January previous 25.0 %bal
• Tuesday 9.30am Mortgage Approvals for December previous 129.0k
• Tuesday 9.30am Net consumer credit for December previous £1.0bn
• Thursday 9.30am CIPS Manufacturing PMI for January previous 51.9 %bal

Two key events dragged Sterling lower last week, the first being a speech by Mervyn King and the second the release of the MPC minutes from their meeting earlier this month. King’s speech was less hawkish than expected and highlighted that inflation could fall sharply in the second half of 2007 as last year’s fuel price increases fall out of the annual figures. The minutes surprised the market revealing only a 5-4 vote in favour of hiking rates despite the committee having prior knowledge of the 3.0% CPI figure and consequently further tightening in February has been left in doubt. This week, attention turns to the CBI distributive trades survey and mortgage approvals for any indication that the recent rate hikes have slowed the retail and housing sectors.

US data

• Tuesday 3.00pm Consumer Confidence for January previous 109.0
• Wednesday 1.30pm GDP (Annualised) for Q4 previous 2.0%q/q
• Wednesday 2.45pm Chicago PMI for January previous 52.4
• Wednesday 7.15pm FOMC Interest Rate Announcement
• Thursday 1.30pm Core PCE Price Index for December previous 0.0
• Thursday 3.00pm ISM Manufacturing Survey for January previous 51.4
• Friday 1.30pm Unemployment Rate for January previous 4.5%
• Friday 1.30pm Non Farm Payrolls for January previous 167.0k

Last week saw a series of strong data releases from the US, the highlights being existing home sales (6.22m units) and new home sales (1.06m units). Durable goods orders (+3.1%m/m) also exceeded expectations as aircraft orders soared (the less volatile ex-transportation figure also rose an encouraging 2.3%). This week attention turns to Wednesday’s FOMC interest rate announcement (expect no change) and Friday’s employment report where the market will be looking for another strong Non Farm Payroll number after a significant improvement in December.

Euro zone data

• Wednesday 10.00am EU Unemployment for December previous 7.6%
• Wednesday 10.00am EU HICP Inflation for January previous 1.9%y/y
• Thursday 9.00am EU Manufacturing PMI for January previous 56.5
• Friday 10.00am EU PPI for December previous 4.3%y/y
  

Last week’s principle highlight was the German IFO Survey (107.9) which disappointed. However, the expectations index rose for the fourth consecutive time signalling that the recent VAT increase should not have a lasting impact. This week, the market will focus on Wednesday’s HICP number and Friday’s PPI figures for further confirmation of a rate hike this quarter.

Interest rate outlook