ECB decides on rates

In the US, market participants will come across a barrage of economic data related to various areas of the economy. Despite being the holiday season, markets expect consumers to have tightened their belt during December in view of the dire economic conditions.

Continued falls in energy costs will offer some relief for producers, who are finding it increasingly difficult to pass on price increases on consumers. Meanwhile, headline inflation is collapsing due to lower gas prices, whereas core inflation is expected to decline further during the coming months. The import price index is also likely to decline further driven by the continued fall in oil prices which has lately been trading in the region of $50 per barrel.

Finally, the release of the industrial production figures will provide markets with a view on US industrial activity during December.

On the other side of the Atlantic, the main focus will be on the European Central Bank (ECB) policy meeting scheduled for Thursday. With the declining inflation, (which went down to 1.6% during December, comfortably below target) and a sharp fall in the private sector credit growth, the ECB is expected to cut rates by 50 basis points to two per cent. The industrial production and trade balance figures both for November will close the week's data release.

In the UK, it will be a rather thin week in terms of economic data release. The main focus will be on the BRC December retail sales monitor, which is the most authoritative measure of sales and one of the most accurate barometers of the UK economy.

The RICS house price balance, which is a gauge for cost of UK homes, is likely to show further decline in house prices, whereas the trade balance figures for November will close this week's economic schedule.

This article has been prepared by Bank of Valletta plc, which is licensed to conduct investment services business by the MFSA, for your general information only. This information is not a solicitation or offer by the bank to acquire or sell securities, nor does it constitute any form of advice by the bank. Appropriate advice should be obtained before making any such decision. Past performance is not necessarily a guide to future performance and the value of your investments may fall or rise.