Tuesday 3rd June 2008
UK Data Disappoints at Start of Busy Week
Sterling saw its biggest one day fall in a month against the greenback yesterday following a poor start to the week for UK numbers. Yet more bad news for the housing market was revealed by the Bank of England, which reported approvals for home loans in April was 58,000 in April, down from 63,000 in March. The other big number out in the UK yesterday was from the Chartered Institute of Purchasing and Supply (CIPS) and showed a manufacturing sector on the brink of contraction. The index as reported by CIPS fell to 50.0 in May from 50.8. A reading below 50.0 signals a contraction.
So the Bank of England should cut rates when it meets this week to stave off the potentially protracted downturn in the housing market and to boost the manufacturing sector back towards growth. If only it were that simple for Mervyn and Co. Inflation still looms large and means a rate cut here in the UK is unlikely this Thursday.
Indeed the Eurozone has inflation at the forefront of its agenda as it celebrates 10 years of the European Central Bank. “This anniversary is no time for complacency” Trichet said as he reiterated the central banks price stability mandate and emphasised that price stability was essential to economic growth.
Today our attention in the main turns to the Eurozone with the preliminary Q1 GDP figure due for release at 10.00am. The market expects the number to be unchanged on the quarter at 0.7%. The PPI figure for Eurozone, also released at 10.00am, will show the effects the continued surge in oil prices is having on the producers of the continent.
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