UK Data
- Monday 9:30am BBA Mortgage Lending for April previous £5.1bn
- Wednesday 9:30am BoE Minutes from prior MPC meeting
- Thursday 11:00am CBI Industrial Trends Survey for May previous 2.0
- Friday 9:30am 2nd Estimate GDP for Q1 previous 0.7%q/q or 2.8% y/y
Last week Sterling suffered due to a less hawkish inflation report and very disappointing retail sales. In the inflation report, the MPC indicated that a further 25bps hike is still required to bring inflation back to the 2.0% target rate. Friday’s retail sales will have raised some concern for the MPC, although they correctly predicted a drop off in retail sales and the inflation component rose at its fastest level since 1999. This week the market will focus on the MPC minutes. The committee remain concerned about inflation and thus confirmation that at least one further rate hike remains on the cards in the months ahead.
US Data
- Thursday 13:30 Durable Goods Orders for April Previous 3.7%m/m
- Thursday 13:30 Initial Claims previous 293K
- Thursday 15:00 New Home Sales for April previous 858K
- Friday 15:00 Existing Home Sales for April previous 6.1m
Last week saw conflicting data from the closely watched housing sector as housing starts exceeded expectations although permits (a forward looking indicator) unexpectedly fell. The key highlight however, was the CPI where the core figure fell to a 12 month low. Nevertheless, inflationary pressures are likely to remain a concern in the months ahead leaving no room for the Fed to loosen monetary policy. The Dollar finished the week stronger against all its major counterparts following industrial production that surpassed even the most optimistic of expectations. This week, the main focus will once again be on the housing sector for further confirmation that the market is bottoming out.
Euro Data
- Tuesday 10:00 German ZEW Economic Sentiment survey for May previous 10.7
- Tuesday 10:00 Trade Balance for March previous -€1.7bn
- Wednesday 10:00 Industrial New Orders for March previous -0.7%m/m
- Thursday 10.00am German IFO business Survey for May previous 108.6
The main highlight last week was the GDP figures which although largely ignored by the market, showed that the EU growth was above expectations, growing at 3.1%y/y. We also had inflation figures which showed that although inflation pushed back up to 1.9%y/y, they fell short of the 2.0% level that the market was looking for. This week, attention turns to Industrial Production, German ZEW Survey and the IFO survey for further signs of increased economic confidence in Europe’s largest economy.
Interest rate outlook
| Country |
Current rate |
Last change |
Date of change |
Next meeting |
| UK(MPC) |
5.50% |
+25bps |
10/5/07 |
7th June |
| US (FED) |
5.25% |
+25bps |
29/06/06 |
28th June |
| EU (ECB) |
3.75% |
+25bps |
08/03/07 |
7th June |