Trichet rules out February rate cut

In Europe, the spotlight will be on the central banks' meetings, where both the European Central Bank (ECB) and the Bank of England (BoE) meetings are scheduled for Thursday. ECB president Trichet's continued insistence that the next "important" monetary policy meeting will not be until March has more or less ruled out an interest rate cut this month.

In terms of economic data, the main focus will be on the Producer Price Index (PPI) for December which is expected to fall to 2.2% from 3.3% the previous month. The January Composite Purchasing Manager Index (PMI), which should continue contracting for some time, and the December Eurozone retail sales figure will close the week's data release in Europe.

In the UK, the BoE is expected to post yet another 50 basis point rate cut this month. Meanwhile, the manufacturing, services and construction PMI and the PPI of input and output during January are all due to be released this week, as well as the industrial and manufacturing production figures for December, which are both expected to decline substantially.

In the US, the economic schedule is rather packed this week. The ISM manufacturing survey will indicate whether there is a glimpse of light in economic recovery. The release of the pending home sales figures as at December and the MBA Mortgage Applications for January will also shed light on the housing market.

The US unemployment rate is expected to reach 7.5% from 7.2% recorded in January. The change in non-farm and manufacturing payrolls, as well as the non-farm productivity will provide deeper analysis of the US labour market's overall state of health.

Factory orders are expected to have declined further in December whereas construction spending is also likely to have contracted. Finally, the consumer credit figure will close this week's data release.

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