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UK Data

• During the week Halifax House Prices for March. Previous -0.3%m/m & 4.2%y/y
• Tuesday 9.30am CIPS Manufacturing PMI for March. Previous 51.3 index
• Wednesday 9.30am Mortgage Approvals for February. Previous 74.0k
• Thursday 9.30am CIPS Services PMI for March. Previous 54.0 index

Sterling plunged to an all-time low against the Euro last week, after it was revealed that UK house prices fell for a fifth consecutive month according to the Nationwide building society. The survey indicated that a typical house fell 0.6%m/m in March, bringing the annual rate of inflation to 1.1%y/y; the slowest rate of growth in 12 years. The survey reaffirms that the UK housing sector remains under significant pressure from increased affordability constraints and markedly tighter lending conditions. The lender, which forecast last November that house prices would remain flat over the course of 2008, is now expecting prices to fall modestly during the year. Coincidentally, this week also consists largely of housing data and it will be interesting to see if the Halifax house price index supports last week’s figures.

US Data

• Monday 2.45pm Chicago PMI for March. Previous 44.5 index
• Tuesday 3.00pm ISM Manufacturing Survey for March. Previous 48.3 index
• Wednesday 1.15pm ADP Employment Survey for March. Previous -23k
• Wednesday 3.00pm Factory Orders for February. Previous -2.5%m/m
• Thursday 3.00pm ISM Non-Manufacturing Business Activity for March. Previous 50.8 index
• Friday 2.30pm Non-Farm Payrolls & Unemployment Rate for March. Previous -63k & 4.8%

The Dollar fell sharply in the early part of last week after data revealed that two pillars of the US economy, house prices and consumer confidence suffered further declines. A leading US house price index highlighted that prices fell 10.7% in the year to January, providing little respite for the US housing sector which recorded such dramatic declines throughout 2007. Separately, consumer confidence sank to a five year low, while expectations for the future fell to a 34 year low. A growing number of surveys have echoed that US consumer confidence is falling sharply, suggesting the onset of recession. This week’s non-farm payrolls take centre stage with the market anticipating a third straight month of payrolls decline after falling by a considerable 63,000 in February.

EURO Data

• Monday 10.00am HICP (Flash Estimate) for March. Previous 3.3%y/y
• Tuesday 9.00am Manufacturing PMI for March. Previous 52.3 index
• Tuesday 10.00am Eurozone Unemployment for February. Previous 7.1%
• Wednesday 10.00am PPI for February. Previous 0.8%m/m & 4.9%y/y
• Thursday 9.00am Services PMI for March. Previous 52.3 index
• Thursday 10.00am Retail Sales for February. Previous 0.4%m/m & -0.1%y/y

The Euro extended gains last week after German business confidence posted a surprise rise in March. The IFO business climate index rose to 104.8 in March from a 104.1 in the previous month, climbing for a third consecutive month reinforcing the resilience of the German economy. The expectations component also rose above expectations, which came as a further surprise given the current economic backdrop of a soaring Euro, rising energy prices and a declining stock market. Given inflation has soared to record levels across the Eurozone in recent months, it will be interesting to see where this week’s flash estimate come in. Risk remains to the topside, which is likely to make it more difficult for the ECB to cut interest rates any time soon.

Interest rate outlook