Market Report

GENERAL NEWS
Jamaican police launched a murder inquiry yesterday into the death of Pakistan cricket coach Bob Woolmer at the World Cup, saying he was strangled. The death on Sunday was "due to asphyxia as a result of manual strangulation", according to a police statement read to a news conference at the Pegasus Hotel in Kingston where Woolmer was found unconscious before he died on Sunday.
Let's hope we cast a shadow over this terrible news with a good sporting weekend. Hopefully our cricket team will go through to the last 8 of the Cricket World Cup and the three lions will also put on a good performance out in Tel Aviv.

UK
Yesterday Sterling moved towards a six-week high against the dollar after robust retail sales figures revived expectations for another UK rate rise. The pound's gains were tempered slightly by comments from Bank of England policy maker Kate Barker saying the Monetary Policy Committee did not want to over-react to recent data on inflation.
Also yesterday the CBI manufacturers' orders balance rose to +8 for March and was the highest since May 1995. Although falling back from a twelve-year high, the measure of output expectations still suggests manufacturers' are feeling upbeat about the prospects for activity in the months ahead. To complete a very firm set of outturns, the expected price balance rose the highest since 1995. In turn, we would expect to see a significant pick up in factory gate prices over the next few months.
No significant data for the UK today.

US
In the US later this afternoon we have the existing home sales (14.00 GMT). Although lower mortgage rates and builders' positive assessments of sales activity point to further improvement in February existing sales, disruptive weather points to a modest decline.
In the last month we have had the largest increase in inventory of homes for sale on the west coast in over a year according to a web site that we have been tracking. This suggests that existing home sales on Friday will be very weak and will remind the market that a continued downturn in the housing market could spread to the rest of the economy. Housing normally doesn't collapse immediately, but slowly weakens as supply builds up without buyers. The inventories of new homes for sale are also at a very high level and will add to the downward pressure in the housing market and the economy so we expect the Greenback to have some movement this afternoon.

EUROZONE
In the Euro area we get the Jan. current account data and Italy Jan. retail sales (both 09.00), while there is a conference in Amsterdam at which Papademos and Wellink will be speaking (14.00, 15.00).
Have a good day and a great weekend and come on the lions.

DH

Market Report

General News
Yesterday saw Gordon Brown deliver his budget to the country, once again smokers, drinkers and drivers seemed to fair worse. In his 11th and almost certainly his final budget, the Chancellor sprung a surprise by announcing a 2p cut in the headline rate of income tax.

UK
Citigroup Inc., the biggest U.S. bank, says the pound may rise to a five-week high against the Euro as accelerating wages will lead the Bank of England to raise interest rates. Minutes from the Bank of England were released yesterday, it was somewhat of a supprise that the vote was 8-1 as most analysts expected a 7-2 vote to keep the rate unchanged, this caused a sharpe reversal in sterlings fortunes against the single currency falling from 1.4746 to 1.4598 in a matter of minutes. This proved to be short lived with sterling recovering to 1.4724 this morning.

US
The dollar traded near a two-year low against the Euro after the Federal Reserve unexpectedly abandoned its bias toward higher interest rates and the European Central Bank signaled it may raise borrowing costs.

The U.S. dollar today weakened against 10 of the 15 most- active Asia-Pacific currencies. It dropped to a decade-low versus the currency of Australia, where the central bank may lift rates as soon as next month. Futures traders added to bets the Fed will cut rates in June.

AUD-NZD
The Australian and New Zealand dollars rose for a sixth day on speculation the U.S. Federal Reserve will cut interest rates this year, bolstering demand for currencies that offer higher yields.

Australia's currency surged to the strongest since 1996 and the New Zealand dollar moved near the highest in more than a year after the Fed yesterday unexpectedly abandoned a bias toward increasing benchmark borrowing costs from 5.25 percent. Australia's key rate is 1 percentage point higher and New Zealand's is 2.25 percentage points more.

VC

UK
Yesterday was the release of some key inflation related data. This showed that we are edging closer to the key 3% level (we saw a figure of 2.8%) which if reached would require a letter written to the chancellor explaining why this level was reached. This has caused the markets to believe that there is a greater chance of an interest rate hike sooner rather than later and hence caused sterling to strengthen against most major currencies.

Today sees the release of the minutes of the Bank of England March MPC which is expected to show a 7 – 2 vote. We will also hear the last budget from Chancellor Gordon Brown, who we expect will want to bow out with a strong economic outlook.

EUROZONE
It is again a very quiet day in the Euro zone, with German retail figures revised this morning.

US
At 6:15 tonight sees the FOMC decide on interest rates, with the result expected to keep the rates on hold. In the statement released afterwards we expect the Fed to make reference to recent market volatility, and also that some inflation risks remain.

DE

UK
The key release this morning is at 9:30 when the UK inflation data for February is released. CPI inflation is expected to come back to a sub consensus 2.5% y/y., and we expect an above consensus RPI inflation figure.
We wait to see the MPC minutes from their last meeting which is likely to show a 7-2 vote to keep rates on hold. However the headline inflation rates is the key to when we will see our next rate hike.

EUROZONE
German PPI was released early this morning showing a monthly increase of 0.3%. There is very little else in the way of economic data being released today from the Eurozone.

US
The only relevant economic release today is released at 12:30 and is the US February housing starts data.

DE

UK
Today sees CPI figures, and we are looking for a sub-consensus of 0.2% rise in February. On Wednesday we see the minutes of the Bank of England meeting, which is expected to show a 7-2 vote to keep rates unchanged.
We will also see the last Budget from Gordon Brown on Wednesday, as well as UK retail sales on Thursday.

EUROZONE
On Wednesday we see ECB President Trichet's quarterly report to the European Parliaments Economic and Monetary committee.

US
There is little in the way of economic data released this week from the US. The FED is expected to change its statement to acknowledge recent financial market movements.

DE

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