Friday June 20, 11:20 AM
OUTLOOK BoE rate-setters join FOMC in spotlight in coming week
LONDON (Thomson Financial) - The U.S. Federal Reserve will be the focus of attention in the coming week, though there's enough UK economic news due to keep sterling markets on their toes.
Though the rate-setting FOMC is set to keep the key Fed funds rate unchanged at 2.00 percent, the markets will be interested to see how tough the rate-setters talk about US inflation in their accompanying statement.
A similar focus will be on Bank of England rate-setters when they address the influential Treasury Select Committee on Thursday morning.
TUESDAY, JUNE 24
-The monthly mortgage lending survey from the British Bankers' Association is set to show the UK housing market retreating further in May.
Analysts expect the number of loans for house purchase approved during the month to have fallen 1,000 to 37,500.
WEDNESDAY, JUNE 25
-Retail sales, as measured by the Confederation of British Industry, are expected to remain under pressure from the strains on household incomes emanating from higher prices.
Analysts expect the CBI's reported sales balance for June to have dipped to -16 percent from -14 percent in May, while the July expected sales balance is forecast to drop to -3 percent from +6 percent.
Geoff Dicks, chief UK economist at the Royal Bank of Scotland (LSE: 91ID.L - news) , noted that the effects of the better weather in the first half of the month were evident in May's CBI survey, as they were in the official figures, which showed sales up a staggering 3.5 percent during the month.
'So the scope for spillover into the June data may be limited,' said Dicks.
'The CBI sales balance may also be a little vulnerable as it is measuring volumes, which may suffer in the face of higher prices,' he added.
THURSDAY, JUNE 26
-Business investment in the first quarter is likely to be confirmed as having fallen for the first time in over two years.
Analysts reckon the quarterly fall will be 1.5 percent, against the 1.4 percent provisional estimate. That would confirm the first quarterly decline since the fourth quarter in 2005.
'Given the deterioration in surveys of business activity and sentiment, the risks are probably skewed slightly to the downside, but there are no compelling reasons to expect a major revision,' said RBS (LSE: RBS.L - news) 's Dicks.
-The major event on Thursday will be what five of the Bank of England's nine rate-setters tell the Treasury Select Committee about the likely path of inflation and interest rates in the coming month.
Joining BoE governor Mervyn King will be outgoing deputy governor John Gieve, his likely replacement Paul Tucker, and external members Kate Barker and Tim Besley.
At present, the markets remain in a quandary about whether interest rates will rise or fall this year. Though King has stressed that the Monetary Policy Committee will do 'whatever it takes' to bring inflation back to target, he has also warned of the damage that will be reaped if borrowing costs are raised to bring inflation back quickly.
FRIDAY, JUNE 27
-UK economic growth in the first quarter is set to be confirmed at below the long-run average.
Analysts expect the quarterly growth rate to be unchanged at 0.4 percent, its lowest for three years, and the annual rate to remain at 2.5 percent.
'We doubt that this release will change the picture much at all -- monthly figures on industrial production were unrevised at -0.2 percent on the quarter, while survey evidence suggests that the current estimate of services growth seems about right at +0.5 percent,' said Philip Shaw, chief UK economist at Investec Securities.
-The UK's current account deficit is expected to have swelled to -12 billion pounds in the first quarter from -8.5 billion in the fourth quarter of 2007.
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