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UK Data

• During the Week Nationwide House Prices for March. Previous -0.5%m/m & 2.7%y/y
• Monday 12.01am Rightmove House Prices for March. Previous 5.8%y/y Actual 5.0%y/y
• Thursday 9.30am BBA Mortgage Approvals for February. Previous 44.3k
• Thursday 11.00am CBI Distributive Trades for March. Previous -3.0% bal
• Friday 9.30am Current Account for Q4. Previous -£20.0bn
• Friday 9.30am GDP (Final) for Q4. Previous 0.6%q/q & 2.9%y/y

Sterling fell victim to further market turmoil early last week after global equity markets tumbled following concerns about Bear Stearns, the US investment bank. Worries over the health of the global banking sector and resulting weakness in UK financial stocks were the catalyst for the Sterling’s decline, reaching an all-time low against the Euro. The move was further compounded by the BoE minutes which revealed two out of nine policymakers voted in favour of cutting rates earlier in the month, pushing short Sterling futures higher. Nevertheless, the Pound received a welcome boost after British inflation surged to a nine month high in February coupled with an unexpected upturn in UK retail sales. Attention now turns to this weeks housing data where firther weakness is expected.

US Data

• Monday 2.00pm Existing Home Sales for February. Previous 4.89mln Actual 5.03mln
• Tuesday 1.00pm S&P Case-Shiller Home Price Index for January. Previous -9.1%y/y
• Tuesday 2.00pm Consumer Confidence for March. Previous 75.0 index
• Wednesday 12.30am Durable Goods Orders for February. Previous -5.3%m/m
• Wednesday 2.00pm New Home Sales for February. Previous 588k
• Thursday 12.30pm GDP Annualised (Final) for Q4. Previous 0.6%q/q
• Friday 2.00pm University of Michigan Sentiment Survey for March. Previous 70.5 index

The Dollar rallied across the board last week after the Federal Reserve cut US interest rates in a bid to restore confidence in the nervous financial markets and boost its ailing economy. The Central Bank slashed interest rates by 0.75% to 2.25%, turning the US Dollar into the second lowest yielding currency in the developed world although the market had been pricing in a high probability of a 1% cut. The Fed have now cut overnight interest rates from 5.25% to 2.25% since September as a rise in defaults on sub-prime mortgages has escalated into a financial crisis. However, the accompanying statement was notable for focussing back on the inflation situation, suggesting that they were running out of room for further large cuts. This week US housing data takes centre stage, but markets will be watching to see if Q4 GDP remains in positive territory after the final revision.  

EURO Data

• Wednesday 9.00am German IFO (Business Sentiment) Survey for March previous 104.1
• Wednesday 9.00am Current Account (nsa) for February. Previous €1.9bn
• Wednesday 10.00am EU Industrial New Orders for January. Previous -3.6%m/m

The Euro came off record highs against the Dollar last week after less than convincing data provided little in the way of Euro support. The Eurozone trade deficit rose sharply to €10.7bn in January, not helped by a strengthening Euro and a surge in Chinese imports. We saw both Eurozone manufacturing and services activity estimates ease slightly in March, where increased price pressures remain the dominant theme. In a quiet week for Eurozone data, the highlight will be Wednesday’s industrial new orders figures after a much weaker than expected December reading. Manufacturers have felt the pinch from a stronger Euro and more expensive borrowing as lenders become more risk adverse.

Interest rate outlook