UK Data
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During the week Halifax House Prices for September. Previous -1.8%m/m & -10.9%y/y
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Tuesday 9.30am Industrial Production for August. Previous -0.4%m/m & -1.9%y/y
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Tuesday 9.30am Manufacturing Production for August. Previous -0.2%m/m & -1.4%y/y
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Wednesday 12.01am Nationwide Consumer Confidence for October. Previous 52.0 index
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Thursday 9.30am Trade Balance for August. Previous -£7.667bln
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Thursday 12.00pm BoE MPC Interest Rate Announcement
Sterling put in its worst performance against the US Dollar for 16 years last week as the surging US unit combined with fears over the extent of the spill-over from the credit crisis on the UK economy. The UK government’s bail-out of mortgage lender Bradford & Bingley initially rattled investors, while a series of gloomy economic data heightened expectations that the economy was headed for recession. The closely-watched Purchasing Managers Indices for both Britain’s services and manufacturing sectors plummeted to fresh record lows in September, while UK house prices fell at their fastest rate in 17 years according to the Nationwide (Building Society). Market attention now shifts to the upcoming BoE October interest rate decision on Thursday, with markets fully pricing in at least a 0.25% cut and possibly 0.50%.
US Data
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Tuesday 7.00pm Fed release minutes from prior (16th Sept) FOMC meeting
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Wednesday 3.00pm Pending Homes Sales for August. Previous -3.2%m/m
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Friday 1.30pm Import Prices for September. Previous -3.7%m/m
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Friday 1.30pm Trade Balance for August. Previous -$62.2bln
A resurgent US Dollar sealed its best performance against a basket of currencies in 16 years last week as international investors sought the safe-haven of US treasuries and the focus of investor concerns switched back across the Atlantic to the woes facing the European financial system. The Greenback jumped as shock over US lawmakers’ rejection of a $700 billion financial sector bailout plan gave way to cautious optimism that a deal would be reached by the end of the week. The Dollar later paused for breath on Friday as the US House of Representatives passed the bailout plan after the US Senate approved it on Thursday night. Investors largely shrugged off a report showing that US employers cut payrolls at the steepest rate in 5 ½ years in September, slashing an unexpectedly large 159k jobs as employment contracted for a ninth straight month. In a relatively quiet week, the data highlight will probably be Friday’s August’s trade balance figure, while Tuesday’s FOMC minutes will give an insight into how seriously the Fed viewed the current financial turmoil earlier in September.
EU Data
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Wednesday 10.00am Eurozone GDP (Final Figure) for 0.7%q/q & 2.1%y/y
The Euro saw its worst weekly percentage loss against the Dollar last week since its introduction in 1999 as the deteriorating financial backdrop prompted the European Central Bank to signal its first rate cut in more than five years. The Central Bank left its benchmark rate steady at 4.25% on Thursday, but ECB President, Jean-Claude Trichet’s remarks that a cut had been discussed left investors betting monetary policy easing could come as soon as November. Mr Trichet said data “clearly confirmed” that economic activity was weakening in the Eurozone while upside inflation risks had diminished. This saw the Euro weaken across the board amid increasing evidence that the effects of the turbulence were spreading outside the US and hitting European financial institutions, with authorities in the region having to step in and bail-out several banks last week, including Fortis and Dexia.
Interest rate outlook
| Country |
Current rate |
Last change |
Date of change |
Next meeting |
| UK (MPC) |
5.00% |
-25bps |
10/04/08 |
9th October |
| US (FED) |
2.00% |
-25bps |
30/04/08 |
29th October |
| EU (ECB) |
4.25% |
+25bps |
03/07/08 |
6th November |