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UK Data

• Tuesday 9.30am CPI for February. Previous -0.7%m/m % 2.2%y/y
• Wednesday 9.30am Average Earnings for January. Previous 3.8% 3m avg
• Wednesday 9.30am BoE release minutes of prior (5-6th ) MPC meeting
• Wednesday 11.00am CBI Industrial Trends for March. Previous 3.0% Bal
• Thursday 9.30am Retail Sales for February. Previous 0.8%m/m & 5.6%y/y

Last week, input prices hit a 16-year high in February as costs rose at their fastest pace since records began. Thus far input costs have been largely absorbed by companies, however fears remain that sooner or later prices will be passed on to the consumer stoking CPI readings. UK manufacturing output grew by a much stronger than expected 0.4% in January, taking the annual increase to 0.6%. However, the wider measure of industrial production, which makes up just under a fifth of GDP, fell by 0.1% during the month, taking the annual rate of growth to 0.4%. The markets attention now focuses on this week’s BoE minutes and CPI data, as food price pressures and the new ONS methodology in dealing with energy price hikes play a central role in lifting headline inflation significantly.

US Data

• Monday 12.30pm Empire State Survey for March. Previous -11.7 index
• Monday 1.00pm Treasury International Capital System (TICS) for January. Previous $56.5bn
• Monday 1.15pm Industrial Production for February. Previous 0.1%m/m
• Tuesday 12.30pm Building Permits & Housing Starts for February. Previous 1061k & 1012k
• Tuesday 12.30pm PPI for February. Previous 1.0%m/m
• Tuesday 6.15pm FOMC Interest Rate Announcement
• Thursday 2.00pm Philadelphia Fed Survey for March. Previous -24.0 index

The Dollar fell to fresh record lows against the Euro and a 12-year low against the Yen on Friday as concerns over the health of the US economy continued to weigh on the beleaguered currency. The Dollar weakened as US retail sales unexpectedly plunged 0.6%m/m in February, confirming that consumers have scaled back spending. News that US bank Bear Stearns had received emergency funding from the Federal Reserve and JP Morgan Chase raised fears that even the top Wall Street names are suffering amidst the credit crunch. The ever weak Dollar was also said to be the cause of price highs of gold and oil last week; gold exceeding the $1000 mark for the first time and crude oil breaching $111 a barrel before falling off slightly. In a busy week for US data, undoubtedly the highlight will be Tuesday’s FOMC interest rate announcement where futures markets are showing a growing likelihood in a full 1.0% cut to revive a weakening economy.

EURO Data

• Wednesday 10.00 Trade Balance (nsa) for January. Previous -€4.2bn
• Thursday 9.00am Manufacturing PMI (Flash Estimate) for March. Previous 52.3 index
• Thursday 9.00am Services PMI (Flash Estimate) for March. Previous 52.3 index

We saw initial Euro strength on Monday after the German ZEW survey of economic confidence came in much stronger than expected. The data provided some encouragement that investors did not expect a deteriorating outlook for the US and problems in financial markets to spell disaster for the German economy. The Euro surged higher after January industrial production within the single currency trading bloc rose above market expectations, improving prospects for Eurozone Q1 GDP and strengthening the cause for the ECB to resist pressure for an earlier rate cut. Eurozone inflation hit a record high of 3.3%y/y in February with soaring oil prices taking their toll despite the cushion of a strong Euro. Highlights of this week’s light data calendar will be Thursday’s PMI estimates, where values remain in close proximity to the crucial 50 level.

Interest rate outlook