Slowing economy may force long-awaited cut in UK interest rates
The main focus of attention this week will be on the Bank of England’s interest rate decision on Thursday and non-farm payrolls out of the US on Friday.
The MPC are widely expected to cut rates on Thursday by 0.25% to 4.5%. This is exactly a year after the last move, a quarter percent hike in July 2003, implemented to cool the housing market.
The cut is expected amidst increased evidence of a slowdown in the UK economy. The consumer sector has seen four quarters of weak growth and the manufacturing sector has fallen back into recession. Last month 4 of the 9 members voted for a reduction. A Reuters poll of 47 economists found that 43 believed the Bank of England would cut rates this week.
US non-farm payrolls, due out on Friday, are expected to have risen by a seasonally adjusted 180,000 in July. This figure is in line with the average increase over the last six months and higher than the weak June figure. US data over recent weeks has been strong, allaying fears of an oil-induced soft patch in the US and indeed the global economy. Arguably trader’s dollar bids haven’t been in line with this strong data, suggesting high expectations for the greenback.
In the shorter term, the USD has slipped against the major currencies this morning ahead of ISM manufacturing due out this afternoon, and following remarks from the IMF that the USD may need to weaken further to help correct the country’s current account deficit.
Manufacturing data is also due out of the UK and the Euro-zone today at 09.30 and 09.00 respectively. Both figures are expected to rise.
Elsewhere in the markets, US stocks may fail to extend their recent rally as higher interest rates offset strong second-quarter earnings. In July, both the Dow and the S&P 500 had their best performances since December 2003.
Oil prices have risen more than 50 cents – to above $61 a barrel, a 3 week high, trading on news that King Fahd of Saudi Arabia, the worlds largest oil exporter, was dead.
The MPC are widely expected to cut rates on Thursday by 0.25% to 4.5%. This is exactly a year after the last move, a quarter percent hike in July 2003, implemented to cool the housing market.
The cut is expected amidst increased evidence of a slowdown in the UK economy. The consumer sector has seen four quarters of weak growth and the manufacturing sector has fallen back into recession. Last month 4 of the 9 members voted for a reduction. A Reuters poll of 47 economists found that 43 believed the Bank of England would cut rates this week.
US non-farm payrolls, due out on Friday, are expected to have risen by a seasonally adjusted 180,000 in July. This figure is in line with the average increase over the last six months and higher than the weak June figure. US data over recent weeks has been strong, allaying fears of an oil-induced soft patch in the US and indeed the global economy. Arguably trader’s dollar bids haven’t been in line with this strong data, suggesting high expectations for the greenback.
In the shorter term, the USD has slipped against the major currencies this morning ahead of ISM manufacturing due out this afternoon, and following remarks from the IMF that the USD may need to weaken further to help correct the country’s current account deficit.
Manufacturing data is also due out of the UK and the Euro-zone today at 09.30 and 09.00 respectively. Both figures are expected to rise.
Elsewhere in the markets, US stocks may fail to extend their recent rally as higher interest rates offset strong second-quarter earnings. In July, both the Dow and the S&P 500 had their best performances since December 2003.
Oil prices have risen more than 50 cents – to above $61 a barrel, a 3 week high, trading on news that King Fahd of Saudi Arabia, the worlds largest oil exporter, was dead.
posted by Wise Money @ 8:30 AM
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