Daily Insight

Following on from last week, the Pound received an unexpected boost on Friday as economic growth in the second quarter came in largely in line with expectations although personal consumption increased by 1.0%, which was slightly more than expected and provides an indication that the UK consumer remains in relatively good health despite this month's surprise increase in interest rates. UK markets were closed yesterday following the Summer Bank Holiday but there was some significant data released in the form of the Hometrack House Price index, which showed that prices rose 0.4% in August, pushing the annual rate to 3.9% from 3.2% in July. The focus this week in terms of economic data released will be UK consumer confidence on Thursday and the CBI Distributive Trades Balance tomorrow. Both of which are widely expected to show growth in the personal sector and may provide scope for the Bank of England to continue raising UK interest rates as the economy continues to show signs of growth.

There is a plethora of significant economic data released in the Euro-zone this week including the ECB interest rate announcement and press conference on Thursday where the Central Bank are widely expected to hold interest rates at 3.0% following a 0.25% increase earlier this month. However, the market will be looking at the accompanying press conference for evidence of a "vigilant" economy, a term the chairman of the Central Bank has commonly used to signal a further rise in rates the following month. There was some economic data released in the Euro-region yesterday with the three month moving average of the M3 money supply rising to 8.3% in July, which was slightly less than expected although the reading is still well above the Central Bank's target of 4.5%. Therefore, the ECB are likely to continue raising interest rates over the coming months in order to cool borrowing and reduce inflationary pressures. There has already been some significant data released in Germany this morning with Consumer Confidence rising to the highest level in almost five-years as the prospect of a sales tax increase next year has a positive effect on household spending in the last month.

The Dollar may come under increased pressure against the majors this week in light of a full calendar of economic data as the market looks for further evidence of a slowing economy. The focus this week will fall on the Nonfarm Payrolls report this Friday, which is widely expected to show that the U.S economy added a modest 125,000 jobs in August while the unemployment rate is expected to drop slightly to 4.7%. Elsewhere, the Dollar may be hampered further in light of the Personal income and expenditure report, which is the Fed's preferred measure for U.S inflation and forecasters are anticipating a modest rise in August while the PCE Deflator may be unchanged at 0.2%. There is some significant data released this afternoon in the States with consumer confidence expected to drop to a reading 104.0 in August as higher interest rates and rising oil prices have a negative impact on consumer sentiment. In addition, this evening will see the release of the minutes from the Fed's last policy meeting, which should provide an insight as to why the Federal Reserve elected to hold interest rates at 5.25% following a prolonged campaign of 17-consecutive rate hikes over a two-year period.

Data Released 29th August

U.S 15:00 Consumer Confidence (August)

U.S 19:00 FOMC Minutes of 8th August Meeting

written by Adam Solomon