The UK and US take centre stage during today's session

Morning Folks,

European markets will look to follow on from yesterday’s gains and take the momentum of this mini recovery into today’s session. Asian markets followed Europe and the US last night to post yet more gains. However we can’t say that we are totally out of the woods yet as markets face some potentially damaging economic data later today and throughout the rest of this week that could potentially spark more selling if expectations are missed. However there is no doubt that strong export and import data from Japan and in line CPI readings from Australia have helped Asia not to spoil the party.

The UK and US take centre stage during today’s session, the BoE meeting minutes followed by the US CPI reading. It will be the voting from the MPC that will be closely watched, recently votes have shown a 7-2-0 split with 2 members voting for rate hikes, however recently market volatility has led to many officials calling for potentially more stimulus and an indefinite hold on interest rates. Today’s result will be interesting to see if the recent equity markets moves have spooked BoE members like they have spooked Fed members in the US. Only last week officials from the Fed were calling for the QE program to be extended in order to prop up an economy that 3 weeks ago nobody had a problem with.

A lot of the discussion around the strength of the UK and US economy has been around the fall in inflation. Both countries seem to have been dragged into a situation where the economy is performing well in terms of growth and unemployment but the CPI inflation data shows a continued slide in prices. Today’s reading out of the US will give us a better understanding of just how sharp this fall in inflation actually is, expectations are for a fall to 1.6%, nowhere near the lows in Europe and still close to the 2% benchmark. Anything bigger than the 0.1% fall expected however could well get many asking questions about the Fed’s latest strategy for letting the economy become more self-sufficient.

Ahead of the open we expect to see the FTSE 100 open higher by 26 points with the German DAX higher by 41 points.