BoE and ECB Rate Decision

The journey continues, yet today both the United Kingdom and the Euro Zone will face their judgment day, with both Central banks have to decide whether to keep their rates steady which is most likely to take place; but the highlight will be headed toward Mr. Trichet speech to see what would be his comments after we saw growth contracting for the first time since the Euro was established.

First Decision: Euro Zone

It's the second rate decision after the ECB decided to hike rates to 4.25% just to anchor the elevated inflationary level, but those levels continued trading in above the ECB comfort zone. When commodity prices began to ease in late July till today pressures eased slightly and according to the CPI flash estimate which was released last week inflation in August will ease down to 3.8% from the previous 4.1% yet those levels remains away from the ECB comfort zone.
But the situation did not stop at those elevated levels; the conditions in the Zone got augmented to the levels where exports got curbed due to the surge in oil and Euro prices, in addition to the lost confidence between citizens stopping them from spending money according to the retail sales data that came in at contraction levels in the past three months. The down turn was obvious in the second quarter, when most fundamentals flipped its direction from the 'sound' stage used by Mr. Trichet into weak levels with some dipping into a contraction, which came in at the end with Germany, Italy and France the leading three economies facing a contraction in growth dragging the overall zone into -0.2% second quarter growth. As we are now looking closely into the third quarter data, we clearly saw some improvement in fundamentals that would prevent the Zone from falling in a contraction in the third quarter, yet more confirmations are needed especially for the September data.

Second Decision: United Kingdom

Not like the Zone; United Kingdom is facing more complicated impediments, falling housing market, deteriorated household incomes from the surge in consumer prices along with contracting manufacturing and services sector is what the Britons are facing. The step taken by the Mervin king saying in his quarterly inflationary report that the Kingdom will face stalling growth with increasing signs that next year growth will hold at a flat reading or a contraction in two quarter. But the problem that the BOE had no space to cut rates at the time being because the threats of rising prices continue to weigh upon the royal lands. Expectations that the committee would be holding steady rates today at 5.00%, just to see when inflation would ease down slightly so they will start putting a rate cuts into a consideration just to escape the fears of recession, yet personally I don't think that a cut would be seen this year, as they need more confirmations from easing commodity prices if it will hold at those low levels compared to the unprecedented levels that were seen in July.

Finally: The United States
The best of the worst that's what markets consider the United States; according to what occurring in the past two economies investors' believe that the states are the safest because they ended the cutting rates journey, even when their housing market did not face a bottom yet; but now they are waiting for the most suitable time to start hiking rates once again in order to contain the elevated consumer prices. A bunch of fundamentals are released in the States, at first we will start with the ADP Employment change which measures the number in employment in the services sector, expectations that the services shrank in August due to increasing signals of the global slow down is having its affect on curbing those industries. The median estimate falls at a falling employment by 30 thousand in August from the previous incline in of 9 thousand, the issue that recently this reading got discarded due the extreme revision taking place each month making an entrusted reading. But what might gives us an indication about tomorrows reading and if the Unemployment sector will remain to weaken or not is the jobless claims which as to be released later this day, with expectations that claim inched lower this week to 420 thousand from the previous 425 thousand claims. So finally today we've got the ISM Non- manufacturing reading which measure the willingness of consumer to investor their money in the business and the services sector, expectations that confidence is not restored back again because the ISM reading is still under the 50 barrier, as expectations points out that in August the levels will be holding at 49.5 levels not changing from the previous.

So it's a heavy loaded day, the European, the Britons and the Americans are all heading their full concentration into markets to see what fundamentals will revel to us today.