What To Expect In The Euro Session

UK Industrial Production is expected to have dropped -12.5% in the year to February, the largest decline since records began in 1976. The industrial sector employs over 18% of Britain’s labor force and produces the bulk of the country’s exports, making it both essential to a lasting recovery in economic growth and highly sensitive to the current slump in global demand. The outlook is likely to remain grim in the months ahead as the largest global recession since the Second World War continues to weigh on overseas sales, keeping the lid on economic growth. Indeed, GDP is seen shrinking -3.3% through 2009, the deepest contraction among the G7 nations according to forecasts from the International Monetary Fund. For their part, the Bank of England is expected to keep benchmark interest rates on hold at 0.50% but will almost certainly announce further quantitative easing measures to check the slide in output.

Moving to the continent, the final revision of the Euro Zone’s Gross Domestic Product is set to confirm that the currency bloc’s economy shed -1.5% through the fourth quarter of last year. Yesterday, February’s Producer Prices fell more than economists expected, showing wholesale inflation was shrinking at an annual pace of -1.8%, the most in a decade. Despite tumbling prices and deepening recession, the European Central Bank cut interest rates less than economists expected last week. In the press conference following the initial announcement, bank president Jean-Claude Trichet said rates had not reached “the lowest limit” and revealed that “the Governing Council intends to decide on further non-standard measures at our next monetary policy meeting”.