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UK Data

• Monday 12.01am Rightmove House Prices for April. Previous 5.0%y/y Actual 1.3%y/y
• Wednesday 9.30am BBA Mortgage Approvals for March. Previous 43.9k
• Wednesday 9.30am BoE release minutes of prior (9-10th April) MPC meeting
• Thursday 7.00am Nationwide House Prices for April. Previous -0.6%m/m & 1.1%y/y
• Thursday 9.30am Retail Sales for March. Previous 1.0%m/m & 5.5%y/y
• Thursday 11.00am CBI Quarterly Industrial Trends for April. Previous 7.0%bal
• Friday 9.30am GDP (Preliminary Estimate) for Q1. Previous 0.6%q/q & 2.8%y/y

Sterling slumped to a record low against the Euro last week after surprisingly weak inflation data heightened expectations that the Bank of England would continue to cut interest rates. CPI rose at an annual rate of 2.5% in March, unchanged from February and below market expectations. Sterling was already under pressure after the RICS housing survey revealed more of its members reported lower UK house prices in the past month than at any time in the last 30 years. However, Sterling clawed back losses on Thursday following reports that the BoE plans to temporarily allow banks to swap mortgage backed securities for Government Bonds, easing the tight credit conditions in the mortgage market. This week, market attention focuses on Wednesday’s MPC minutes following a 0.25% cut to 5.0% on the 10th April. While inflation concerns remain, we judge that the need to guard against a sudden downturn in activity gained momentum in the run up to the meeting.

US Data

• Wednesday 3.00pm Existing Home Sales for March. Previous 5.0mln
• Thursday 1.30pm Durable Goods Orders for March. Previous -1.1%m/m
• Thursday 3.00pm New Home Sales for March. Previous 590k
• Friday 3.00pm University of Michigan Sentiment Survey for April. Previous 63.2 index

Consumer prices resumed their upward path last month, rising 0.3%m/m as mounting petrol costs put further pressure on US consumers struggling with a frail labour market and slumping house prices. However, a relatively modest 0.2%m/m increase in core prices raised expectations that the Federal Reserve will continue to keep cutting rates to stem an economic slowdown. Meanwhile the real estate sector suffered a fresh blow as housing starts plunged to a 17 year low, compounding a dismal outlook for the construction sector. This week’s focus remains on the US housing sector, with both new and existing homes sales expected to report declines.

EURO Data

• Wednesday 9.00am Manufacturing PMI (Flash) for April. Previous 52.0 index
• Wednesday 9.00am Services PMI (Flash) for April. Previous 51.6 index
• Wednesday 10.00am EU Industrial New Orders for February. Previous 2.0%m/m
• Thursday 9.00am German IFO (Business Sentiment) for April. Previous 104.8 index
• Thursday 9.00am EU Current Account (nsa) for February. Previous -€19.1bn

The Euro hit a fresh record high against the Dollar last week as the diverging monetary policy stances between the Eurozone and the US kept the single currency well supported. The move was fuelled largely by fears that inflation would prevent the ECB from cutting interest rates in the near term after the consumer prices index for March was revised up to 3.6%y/y. However, Euro gains were capped after the mood among German investors worsened for the first time in 3 months in April, plagued by fears about surging inflation, record oil prices and the strength of the Euro. This week, manufacturing and services PMI data are both expected to report moderate deteriorations. It will also be interesting to see how the German IFO index holds up following March’s surprisingly strong reading.

Interest rate outlook