The hawks eye the BoE's quarterly inflation report
In the UK, the short end of the gilt market shrugged off anther set of poor inflation figures highlighting the current bullish rate sentiment.
July CPI increased to 4.4% year on year in July from 3.8% in June. Worthwhile remembering that the Bank of England had July's inflation data in its hands when policy was unchanged last week. With the latest utility price hikes still to kick in headline inflation looks set to reach 5% in September.
The Bank of England's Quarterly Inflation Report is due at 10.30 today and will be closely scrutinized. Although the BoE's latest Inflation Report looks certain to downgrade its 2009 GBP projection, the near-term inflation outlook should be revised sharply higher.
Given this, a hawkish press conference from Mervyn King is likely, keeping the door open for a possible rate hike if needed. The key issue for the markets remains whether the growth slowdown will be sufficient to push CPI below its target on a two year horizon. Labour market data should also be monitored, particularly wages.
In the US, Treasuries rallied yesterday on renewed financial worries, leading to a steepening of the yield curve. Dovish comments by Fed member Gary Stern who stated the Fed "should be patient" in raising rates were also supportive.
Fed hawk Fisher also gave relatively pessimistic remarks about the growth outlook. June's trade data was better than expected but evoked little market reaction.
Briefly on the Eurozone. Policy wise, recent ECB comments have been mixed. On the one hand, Bini-Smaghi warned that Euroland growth had worsened significantly recently. On the other hand, ECB hawk Weber continued to highlight inflation worries.
Today's Eurozone industrial production should highlight the difficult outlook for the corporate sector but this will be overshadowed by US retail sales where the market is looking for a weaker July figure signaling that the positive impact of recent tax rebates has faded.
The contents of this blog are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. The Wise Money Blog cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.
July CPI increased to 4.4% year on year in July from 3.8% in June. Worthwhile remembering that the Bank of England had July's inflation data in its hands when policy was unchanged last week. With the latest utility price hikes still to kick in headline inflation looks set to reach 5% in September.
The Bank of England's Quarterly Inflation Report is due at 10.30 today and will be closely scrutinized. Although the BoE's latest Inflation Report looks certain to downgrade its 2009 GBP projection, the near-term inflation outlook should be revised sharply higher.
Given this, a hawkish press conference from Mervyn King is likely, keeping the door open for a possible rate hike if needed. The key issue for the markets remains whether the growth slowdown will be sufficient to push CPI below its target on a two year horizon. Labour market data should also be monitored, particularly wages.
In the US, Treasuries rallied yesterday on renewed financial worries, leading to a steepening of the yield curve. Dovish comments by Fed member Gary Stern who stated the Fed "should be patient" in raising rates were also supportive.
Fed hawk Fisher also gave relatively pessimistic remarks about the growth outlook. June's trade data was better than expected but evoked little market reaction.
Briefly on the Eurozone. Policy wise, recent ECB comments have been mixed. On the one hand, Bini-Smaghi warned that Euroland growth had worsened significantly recently. On the other hand, ECB hawk Weber continued to highlight inflation worries.
Today's Eurozone industrial production should highlight the difficult outlook for the corporate sector but this will be overshadowed by US retail sales where the market is looking for a weaker July figure signaling that the positive impact of recent tax rebates has faded.
The contents of this blog are for information purposes only. It is not intended as a recommendation to trade or a solicitation for funds. The Wise Money Blog cannot be held responsible for any loss or damages arising from any action taken following consideration of this information.
Labels: Bank of England, UK inflation, US trade deficit
posted by Drs Search @ 9:02 AM
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