The UK Manufacturing Purchasing Managers Index fell to 54.6 – far less than the market expected. This still represents growth (anything above 50 shows expansion) however very weak growth. This has had a large affect on Sterling as the manufacturing sector has been the best performing sector since the UK came out of recession.
In an attempt to curb Inflation the Central Bank of India raised its interest rates for the ninth time. Interest rates now sit at 7.25%, a 50 base point increase, which is much more than the markets expected. Inflation reached 8.9% in March despite the previous rate rises.
The Royal Bank of Australia retained interest rates at their current level of 4.75% for another month. This is the fifth consecutive month they have decided to leave at the present level. This continues to give strength to the Australian Dollar trading just below 1.52
According to Nationwide, house prices in the UK fell by 0.2% in April. They also said that in the past six months we have seen an overall static position on values, as prices have risen on three occasions and fell on three.
Sterling remains under selling pressure as the data released continues to come in under market expectations. Sterling traded around 1.11 yesterday against the Euro and dropped below 1.65 against the US Dollar.
This week’s main focus once again, centers on both the Bank of England and European Central Bank rate meetings. Expectation is for both to retain a neutral position on this occasion; however it is expected that the ECB will consider further interest rate increases in the near future.
Portugal has agreed a seventy-eight billion Euro bail-out in a three year loan agreement which needs to be in place to cover €5bn which has to be repaid on the 15th June. As this agreement takes place the markets believe that the bail-out of Greece has failed and fully expect that they will need to write off a portion of the government debt.
