Bank of England expected to hold interest rates…

With a relatively busy period ahead for the market in terms of economic data releases, America should probably use Labor Day, a traditional day of rest, to prepare for the week ahead. In the UK this week, the most anticipated piece of data this week will be the Bank of England rate announcement on Thursday.

With expectations that the BoE will leave interest rates unchanged this week, following last month’s surprise increase. Policy makers, led by Mervyn King, will keep the rate at 4.75 percent following a quarter-point increase on August 3rd. The U.K. economy expanded at the fastest pace in two years in the second quarter, prompting the central bank to raise its estimates for growth and inflation for 2006. Inflation reached 2.4 percent in July staying above the central bank’s target for a 3rd month. The minutes to the last rate-setting meeting showed that all but one policy maker backed the increase.

In the Eurozone, retail sales for July, due for release tomorrow, are expected to rise year on year by 1.5 per cent, the same rate as the previous month. If expectations are correct this would support the European Central Bank’s view that the eurozone’s export-driven recovery is broadening to consumer spending.

In the US, the institute of supply managements non-manufacturing survey, due on Wednesday, has been pointing to a slowdown in service sector activity. The consensus forecast is for the headline measure to rebound slightly from 54.8 in July to 55. This is likely to be reflected in the Beige Book, on Wednesday, which should show the growth slowdown broadening across a number of US regions.

Oil prices firmed early this morning after a slide below $70 as markets braced for several weeks of inaction on Iran’s nuclear dispute with the west. Oil prices slumped nearly 5 percent last week as the season’s first hurricane proved a false alarm and U.S. oil inventories rose, but the jitters over Iran kept losses in check.

Gold prices rose this morning on expectations that demand from jewellers will increase as they stock up for seasonal buying. Gold has gained every September since 2000 as jewellers buy the metal for the winter holidays.

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