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UK Data  

• Tuesday 9.30am CPI for Feb previous 2.7% y/y
• Wednesday 9.30am BOE Release Minutes From Prior Meeting
• Wednesday 11.00am CBI Industrial Trends Survey for March previous 4.0 index
• Thursday 9.30am Retail Sales for Feb previous 1.1% m/m
• Thursday afternoon Presentation of the 2007-2007 budget
  

Last week Sterling remained vulnerable as risk aversion amongst investors persisted as the carry trade unwound further. However Sterling rallied later in the week as the PPI Input component showed the highest monthly rise since July last year, and Average Earnings rose unexpectedly to 4.2%. Both figures that will have no doubt caught the MPC’s attention. Following on the same theme, this week’s highlight will be on Tuesday where the market will look to see what, if any impact recent rate rises have had on inflation, and Wednesday to gauge the MPC sentiment from the minutes of the last meeting.

US Data 

• Tuesday 12.30am Building Permits for Feb previous 1.571m units
• Tuesday 12:30am Housing Starts for Feb previous 1.408m units
• Wednesday 18.15 FOMC Interest Rate Announcement
• Thursday 14.00 Leading Indicators for Feb previous 0.5% m/m
• Friday 15:00 Existing Home Sales for Feb previous 6.46m units

Last week the Dollar remained relatively stable vs both Sterling and the Euro till the end of the week, when former FED Chairman Greenspan suggested that the situation in the Sub-prime mortgage market had the potential to spill over and have a knock on impact in other sectors of the economy. This coupled with news of sluggish factory activity in the Northwest and a sharp rise in producer prices weighed on the Dollar. Friday however was a better day and saw the Dollar recover some of its losses as Industrial output jumped up by 1% and we saw inflation push up to 2.4% vs expectations of 2.3%. This week the calendar is fortuitously dominated with housing data following the developments in the Sub-prime mortgage sector last week. The FOMC rate announcement is not expected to throw up any surprises and we favour the FED to leave rates on hold. 

Euro Data 

• Tuesday 10.00am Trade Balance for Jan previous €2.5bn
• Thursday 10.00am Industrial New Orders for Jan previous 2.8% m/m

The main highlights from last week in the Eurozone were firstly the German ZEW Economic Survey which exceeded expectations and indicated a turn around in a series of disappointing numbers relating to sentiment in Europe’s largest economy. The second highlight was the inflation on Thursday that showed inflation remaining steady at 1.8%. A relatively light calendar this week, the main highlight is likely to be industrial Orders on Thursday.

Interest rate outlook