SUMMARY If there is no change to the structural causes of current UK supply chain difficulties, we expect this to impact growth - leading to a weaker Sterling against the US Dollar - provided the US labour market remains strong and the Fed taper begins. We are neutral on Sterling/Euro. UK SUPPLY CHAIN WOES Supply constraints have been cited as a key factor in next wee's PMI data - with recruitment difficulties in particular noted as an issue despite a big monthly rise in empl

US FED CONSIDERING WHEN TO START TAPERING ASSET PURCHASES Risk sentiment was under pressure over the past week. Global equity markets and government bond yields mostly fell and oil prices declined for a third consecutive week. A long shadow was cast over financial markets by last Friday’s slump in a measure of US consumer sentiment to a decade low, reinforced by weak July retail sales data this week, which raised concerns that US consumer spending may be slowing by more than

ONLY TEMPORARY RELIEF ON UK INFLATION The coming week’s UK data calendar is busy. Possibly of most interest will be in the latest inflation numbers. In the space of four months, the annual rate of CPI inflation has picked up from just 0.4% in February to 2.5% in June and is set to move higher still over the coming months. EXPECT 4% The Bank of England’s recent update contained an eye-catching upward revision, with headline CPI now projected to move up to around 4% in Q4. We e