Bank of England Monetary Policy Committee meeting on Thursday dominates a busy week for the UK

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Friday's hotly anticipated US non-farm payrolls produced a mixed bag of results. The good news was that payrolls increased to the second highest monthly level since the credit crisis began and unemployment fell. However, on the negative side, the strength seen can be explained as a reversal of strongly weather affected data in January. If these two results are averaged, there is actually no improving trend apparent.

Also, considering the inflation push, there was no wage growth at all which is worrying. The markets reaction saw US Dollar weakness with Sterling and the Euro the main beneficiaries. 

Geopolitical issues continue to cloud sentiment with escalating violence in Libya and the announcement by Saudi Arabia that it will not tolerate public protests. In response to this, crude oil prices rose 2% to a two and a half year high.

Last week there was some support for the global recovery as US and Eurozone manufacturing activity advanced from the previous month. Housing data was less encouraging with January’s US pending home sales dropping for a second month on Monday, while on Friday Halifax revealed UK house prices fell 0.9% month-on-month in February. Adding to concerns, the UK services sector slowed last month, a fact that may impact on any Bank of England rates decision.

This week the Bank of England decision on Thursday dominates a busy UK economic calendar. The Monetary Policy Committee (MPC) is widely expected to keep interest rates steady at 0.5% and keep quantitative easing at £200 billion. Despite the hype surrounding the prospect of higher interest rates with two more MPC members calling for a rise of 0.25% and one calling for an increase of 0.5% last month, it is unlikely there will be a rise in interest rates this week. The majority of the MPC remains in wait and see mode, concerned about the negative impact on output that could occur as a consequence of beginning raising rates.

Also this week UK retail sales and the Royal Institute of Chartered Surveyors house prices for February are released while in the US retail sales and the weekly jobless claims are out on Friday. The Eurozone is in for a quiet week, with only second tier German date released.