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BoE policy unchanged, UK budget the focus

Focus this week will centre on the new Conservative government's supplementary budget (Wednesday). The headline budget trajectory of aggressive fiscal consolidation is not expected to be materially changed. 

At the margin, the Chancellor might wish to show greater consolidation in the first two years and relax the fiscal effort thereafter. More importantly, the Chancellor is expected to detail measures to achieve the expenditure reduction targets insisting in particular on cutting housing benefit and tax credits as well as outlining efforts to cut tax evasion and aggressive tax avoidance. GBP outperformance versus the EUR will be moderate as tight fiscal policy and institutional risks weigh on UK economic growth and result in more accommodative monetary policy.

Elsewhere, the Bank of England should leave its policy settings unchanged on Thursday, as widely expected, and therefore issue no statement. After communication by the more hawkish members of the MPC (Weale, McCafferty and Forbes) over the past month, dovish rhetoric returned last week amid mixed economic data. This came in the form of cautious comments from Governor Carney following the release of the Financial Stability Report and a speech from Chief Economist Andy Haldane which emphasized the risks of increasing rates too soon. 

"We continue to expect the first rate hike in Q1 2016 and a moderate pace of tightening thereafter (25bp per 6 months)" says Barclays.

In terms of data, Industrial and manufacturing output (Tuesday) is likely to decline 0.3% m/m (consensus: -0.2%) and 0.2% m/m (consensus: +0.1%) in May, respectively.

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November 20 20:00 UTC Released

BRCAGED Net Payroll Jobs*

Actual

77 k

Forecast

Previous

77 k

November 20 13:00 UTC Released

RURetail Sales YY

Actual

3.0 %

Forecast

3.9 %

Previous

3.1 %

November 21 13:55 UTC 333333m

USRedbook MM

Actual

Forecast

Previous

-1.2 %

November 21 13:55 UTC 333333m

USRedbook YY

Actual

Forecast

Previous

2.3 %

November 22 12:00 UTC 16581658m

USMBA Mortgage Applications

Actual

Forecast

Previous

3.1 %

November 22 12:00 UTC 16581658m

USMortgage Market Index

Actual

Forecast

Previous

401.7 Bln EUR

November 22 13:30 UTC 17481748m

USJobless Claims 4-Wk Avg

Actual

Forecast

Previous

237.75 k

November 22 13:30 UTC 17481748m

USInitial Jobless Claims

Actual

Forecast

240 k

Previous

249 k

November 22 13:30 UTC 17481748m

USContinued Jobless Claims

Actual

Forecast

1.882 Mln

Previous

1.860 Mln

November 22 14:30 UTC 18081808m

BRForeign Exchange Flows*

Actual

Forecast

Previous

-3.412 Bln USD

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