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UK Data

• Monday 9.30am PPI Input & Output Prices for April. Previous 20.4%y/y & 6.2%y/y
• Monday 9.30am World Trade Balance for March. Previous £7.487bn
• Tuesday 12.01am RICS Housing Survey for April. Previous -78.5 index
• Tuesday 9.30am CPI for April. Previous 0.4%m/m & 2.5%y/y
• Wednesday 9.30am Average Earnings for March. Previous 3.7 3-Month Average
• Wednesday 9.30am Claimant Count Unemployment for April. Previous -1.2k
• Wednesday 10.30am BoE Inflation Report

Sterling slumped to a 10-week low against the Dollar last week, as further evidence emerged that the UK economy was suffering the effects of the unrest on financial markets. Growth in Britain’s dominant service sector all but dried up in April, as the UK purchasing managers index fell to its weakest level in 5 years. Furthermore the survey also showed confidence in the sector had fallen to its lowest since the terrorist attacks on the US in 2001. Sterling managed to edge higher on Thursday, after the Bank of England kept interest rates on hold at 5.0%. However, these gains were relatively short-lived as most analysts were expecting the Central Bank to resume its monetary easing cycle in June, keeping pressure on the Pound. The market will be looking for further clues on the UK’s economic outlook following the Bank's quarterly inflation report and April CPI data.

US Data

• Tuesday 1.30pm Retail Sales for April. Previous 0.2%m/m
• Wednesday 1.30pm CPI for April. Previous 0.3%m/m % 4.0%y/y
• Thursday 2.00pm Treasury International Capital System (TICS) for March. Previous $72.5bn
• Thursday 2.15pm Industrial Production for April. Previous 0.3%m/m
• Thursday 3.00pm Philadelphia Fed Survey for May. Previous -24.9 index
• Friday 1.30pm Building Permits & Housing Starts for April. Previous 927k & 947k
• Friday 2.55pm University of Michigan Sentiment Survey for May. Previous 62.6 index

In a quiet week for the US, an article in the Financial Times ahead of the BoE/ECB rate decisions stole the limelight, sending the Dollar to a 2-month high against the Euro. The article indicated that US and European officials had a united desire to see the Dollar strengthen against the Euro. The FT said officials in both the US and Eurozone wanted to avoid a situation where the Dollar fell too far against the Euro and then snapped back as investors realised the US economy was not headed for a depression and European growth was softening. The main data highlight this week is likely to be the US CPI data on Wednesday, expected to the topside.

EURO Data

• Wednesday 10.00am Industrial Production for March. Previous 0.3%m/m & 3.1%y/y
• Thursday 10.00am Eurozone GDP for Q1 (First Estimate). Previous 2.2%q/q & 0.4%y/y
• Thursday 10.00 HICP for April (Final). Previous 1.0%m/m & 3.6%y/y
• Friday 10.00am Trade Balance (nsa) for March. Previous €0.8bn

The Euro dropped to a 2-month low against the Dollar last week, as further disappointing data heightened expectations that the ECB might signal that it was ready to start cutting interest rates. Retail sales for April were much weaker than expected, falling in both monthly and annual terms, underlying concerns over the slowing economy. However, the Euro recovered somewhat after Jean Claude-Trichet, ECB President stuck to his hawkish rhetoric, reiterating “upside risks” to inflation as the Central Bank kept interest rates on hold at 4.0%. The decision had been unanimous, with no members of its governing council calling for either a rate hike or cut, Trichet said. Market attention now focuses on the final Eurozone inflation figure released on Thursday, which is expected to fall, although remain above 3.0% until October time.

Interest rate outlook