Thursday 21st August 2008

Yesterday, the BoE minutes confirmed what the market had been expecting with a 7-1-1 split, the majority sticking with the status quo and keeping rates on hold. The hawk of the MPC, Tim Besley, voted for a hike arguing a pre-emptive rate rise would assist in halting inflationary pressures. David Blanchflower as usual cited downside risks to growth weighed far heavier than the inflation problem. The rhetoric in the minutes echoed what was said in the inflation report, maintaining that there was greater downside risks to growth, that inflation would remain above the 2 percent target for the majority of the forecast horizon but that it will fall below this target at the 2-year mark.

Staying in the UK, CBI industrial trends came in slightly below market expectations at -13 yesterday and today we look to UK retail sales to give us direction. Market expectations are for retail sales to decline again for the month of July following other recent weak data releases. The number surprised to the upside in May so it will be interesting to see how our capacity to spend faired last month.

Today in the Euro-zone, PMI surveys will give an indication of how manufacturing and services are fairing. The Market expects numbers to marginally decrease on the month in contradiction to the upbeat numbers released in the ZEW sentiment index on Tuesday.

Recent USD strength seems to have waned following slight rises in gold and oil prices taking other commodities with them. There are concerns too for the large US mortgage institutions and their ability to raise cash which is contributing to the dollars slowing pace. US labour market weakness is expected to continue today with the release of initial jobless claims reporting around the 43k number with continuing claims expected to show an increase to nearly 3.5m. Later in the afternoon, we’ll see the Philadelphia Fed which has been soft all year but might pick up a little following recent ISM readings around the 50 level.

More plaudits for Team GB who took yet another Gold in the sailing for Iain Percy and Andrew Simpson and congratulations to David Davies who took silver in the 10km swim. And it’s not over yet!

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