ECB to hike rates this week

The euro and sterling both shed around 1.5 cents against the dollar last week and kick off this week trading close to parity and just under $1.19 respectively. This in turn sees the single currency-pound exchange rate hovering in and around 85p at the start of play today

Both European and US stocks ended the week on a positive note, gaining around 2.5% and 2.0% respectively on Friday, though German and US government 10-year bond yields still fell on the day ending at around 1.12% and 2.92% respectively

There was a mixed bag of economic data in the US on Friday, with consumer confidence improving a touch in July and retail sales rising in June, but industrial output falling back last month from May. In any case, in a week that revealed the annual rate of consumer price inflation rose to over 9% last month, the Fed remains firmly on track to raise interest rates again later this month

The ECB Governing Council meets this Thursday and is set to raise its key interest rates, including the deposit rate (currently -0.50%) and refi rate (currently 0.00%), by 25bps, the first hike in rates since July 2011

Data due over the course of this week include the latest labour market report in the UK on Tuesday as well as CPI inflation and retail sales there on Wednesday and Friday respectively, while flash PMIs in the Euro area, UK and US are published on Friday also