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MENAFN - ecPulse - 13/11/2012

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Market sentiment is about to be fueled again as traders await inflation data from the euro areas largest economy ahead of the Bank of Englands quarterly inflation report, with euro area confidence and Greece most-awaited bond auction to feature the European session.

The London-based Office for National Statistics publishes the United Kingdoms consumer and producer prices for October. Annual CPI inflation growth is expected to rise slightly to 2.3 percent from 2.2 percent, while annual PPI probably steadied at 2.5 percent.

The economy benefited from the drop in inflation and decline in unemployment. CPI for the year ended September decelerated to 2.2%, the slowest in nearly three years, and ILO unemployment rate for the three months ended August retreated to 7.9 percent.

MPC members at the BoE decided this month to leave both interest rate and APF quantity unchanged, where they may delay adding to stimulus after the release of the latest growth and inflation forecasts in the banks quarterly inflation report due later Tuesday.

Slower inflation rates could give the BoE the green light to even exercise additional monetary easing to support the royal economy. Simultaneously, latest GDP figures signaled the recovery is on track after the U.K. economy expanded by the strongest pace in almost five years. 

U.K. third –quarter GDP grew to record growth of 1.0 percent, halting three consecutive quarter of contractions, after falling 0.4 percent on the back of the governments rigid austerity drive which weighed heavily on market sentiment and household spending.

Moving to the euro area and Germany, where confidence is still hammered by the sovereign debt crisis and Spains reluctant stance about a final bailout request, all risking to push the euro area economy into its first double-dip recession in almost four years.

In Germany, the ZEW current situation index is expected to ease to 8.0 in November from 10.0 in October, while economic sentiment index is expected to notch a -9.8 from -11.5. In the euro area, ZEW economic sentiment is expected confirm business deterioration.

Confidence is right on the edge in the fourth quarter amid ongoing failure by European leaders to contain a three-year-old debt crisis. The last meeting was capped without a long-awaited signature to unlock a second tranche of rescue loan for Greece.

Markets are building a lot of expectations of a near salvation for the debt-laden government which is scheduled to sell new treasury bills maturing in 28 and 91 days on Tuesday in order to cover its immediate financing needs until it receives the crucial disbursement.


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