• Weekly briefings
• Archive

UK Data

• Monday Market Holiday – May Bank Holiday
• Tuesday 9.30am CIPS Services PMI for April. Previous 52.1 index
• Wednesday 00.01am Nationwide Consumer Confidence for April. Previous 77.0 index
• Wednesday 9.30am Industrial Production for March. Previous 0.3%m/m & 1.3%y/y
• Wednesday 9.30am Manufacturing Production for March. Previous 0.4%m/m & 1.9%y/y
• Thursday 12.00pm BoE MPC Interest Rate Announcement

Last week proved largely mixed for Sterling, closing lower against the Dollar but making further ground against a vulnerable Euro. The Pound initially weakened after BoE mortgage approvals fell to their lowest level since comparable records began in 1993, suggesting the housing market slump deepening. Meanwhile, British retail sales slumped in April, to their lowest level since November 2005 according to the latest Distributive Trades survey from the CBI. House prices continued to fall in April, with both the Nationwide Building Society and the UK’s largest mortgage lender, the Halifax reporting their first year-on-year declines in more than a decade. However, Sterling found support after the CIPS manufacturing survey reported that both input and output prices rose to record levels in April, indicating that inflation was likely to remain a major concern for the Central Bank. Market attention now shifts to the BoE’s interest rate announcement on Thursday, which remains finely balanced between the competing demands of slowing economic growth and rising inflation.

US Data

• Monday 3.00pm ISM Non-Manufacturing Survey for April. Previous 52.2 index Actual 50.9 index
• Wednesday 3.00pm Pending Homes Sales for March. Previous -1.9%m/m
• Friday 1.30pm Trade Balance for March. Previous -$62.3bn 

The Dollar climbed to a 1-month high against the Euro last week after the Federal Reserve signalled that it may pause cutting interest rates following its latest 0.25% cut in the Fed Funds rate to 2.0% on Wednesday. In accompanying statement, the US Central Bank highlighted that the outlook for inflation remained uncertain but was less bearish on the outlook for the economy. The Dollar extended gains on Friday afternoon after April’s non-farm payrolls report backed up the Fed’s less bearish view of the economy. While US employers shed 20k jobs last month, the figure came in much stronger than market expectations for 75k. The unemployment rate also fell from 5.1% to 5.0%, below expectations for 5.2%, having jumped 0.3% the last time around. In a quiet week for the US, the market will be looking for any signs of recovery in both the services and housing data.

EURO Data

• Tuesday 9.00am Services PMI (Flash Estimate) for April. Previous 51.6 index
• Tuesday 10.00am PPI for March. Previous 0.6%m/m & 5.3%y/y
• Wednesday 10.00am Retail Sales for March. Previous -0.5% & -0.2%y/y
• Thursday 12.45pm ECB Interest Rate Announcement, followed by news conference at 1.30pm

The Euro weakened across the board last week after inflation was seen moderating to 3.3% in April from 3.6% in the previous month, suggesting that the worst may be over. The ECB expects to see further cooling of price pressures over the next 18 months, but for now at least, inflation remains well above the Central Bank’s target of just below 2.0%. The Euro extended losses on Friday after an unexpected fall in German retail sales for March and Eurozone manufacturing activity falling to its slowest pace in nearly three years in April. The index, now only just above the 50 mark that divides growth from contraction, provides growing evidence of a cooling Eurozone economy, with indications that worse is to come as new orders shrunk for the first time since May 2005. Market attention now shifts to Thursday’s ECB interest rate decision, where rates are expected to remain on hold at 4.0%, despite recent heightened downside risks to growth.

Interest rate outlook