Data coming out of the UK economy has been largely positive, only a small hiccup has caused a shock for investors. However, the GBP was unmoved by this piece of data. The small hiccup was manufacturing production (Actual: -1.3%, Expected: 0.4%, Previous: 0.3%, 08/07/2014) which was below market expectations. However, investors understand this is a small hiccup and they remain optimistic over the current recovery. We still expect the BoE to be the first central bank among the ECB and Fed to raise interest rates. This week's data regarding inflation will provide us with more information of when the BoE may raise interest rates. If CPI y/y (Expected: 1.6%, Previous: 1.5%, 15/07/2014) falls below expectations then we are likely to see a delay in the interest rate hike.
Meanwhile on the other side of the English Channel, the Euro Bloc is just about staying afloat. The major concern that the ECB (European Central Bank) has is the strong Euro. A strong Euro is hurting the export market and is probably the cause of low inflation (imports become cheaper). Inflation has also been a major concern with the ECB. The changes in monetary policy made in June still need some time to show through in the data. Although, if no results show from these changes, then we could see the ECB draw nearer to QE (Quantitative easing). QE has been used by the BoE and Fed with great results. QE will help address the concerns that the ECB is facing, ensuring a weaker currency and ensuring they reach their target inflation rate of 2%.
Meanwhile on the other side of the English Channel, the Euro Bloc is just about staying afloat. The major concern that the ECB (European Central Bank) has is the strong Euro. A strong Euro is hurting the export market and is probably the cause of low inflation (imports become cheaper). Inflation has also been a major concern with the ECB. The changes in monetary policy made in June still need some time to show through in the data. Although, if no results show from these changes, then we could see the ECB draw nearer to QE (Quantitative easing). QE has been used by the BoE and Fed with great results. QE will help address the concerns that the ECB is facing, ensuring a weaker currency and ensuring they reach their target inflation rate of 2%.
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