How are the recoveries ahead of ECB and Bank of England meetings tomorrow?

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As we rapidly approach monetary policy meetings from the Bank of England monetary policy committee and European Central Bank, it is probably worthwhile recapping on recent data releases to get a gauge on how the UK and Eurozone economic recoveries are progressing.

In the UK, recent figures continue to point to a weak recovery currently, with manufacturing activity slowing down in recent months but some encouraging signs of rebound from non-retail services. Inflation is still an issue, running at more than double the Bank of England's target with wage inflation still lagging behind.

In the Eurozone it is a similar story. Peripheral Eurozone countries are really struggling with austerity measures and are making little, if any headway on growth. The worry is that the strong growth from 'core' Eurozone economies such as France and Germany, is also slowing down.

However, there are higher than target inflation rates in both economies, which remains of concern to the central banks. The ECB have been more vocal in their opposition to inflation and have hinted to the market that they may raise interest rates sooner than later, something that may backfire if growth slows further in the core. The MPC on the other hand have been less concerned by current high inflation rates, as they expect rates to fall sharply in 2012.

Overall, there is probably a greater danger in the ECB's strategy versus that of the MPC's, but that's not reflected by FX or interest rate markets.

Overnight, the Reserve Bank of Australia held interest rates at 4.75% as expected. The accompanying statement from the RBA gave nothing away with regard to possible rate hikes for the remainder of the year which saw the Australian Dollar sold.

There is not a lot of data today, with most interest in the Fed's Beige Book tonight, which will likely highlight just how tough it is going for the US economic.