Interest rates expected to head higher

The macroblog points out that expectations for further rate hikes by the Fed continue to rise. But the economic data reported yesterday were not unambiguously pointing to higher rates. While US consumer credit in April saw its biggest gain since June 2005, home loan refinancing applications last week sank to their lowest this year and new home mortgages barely budged.

Japan is also expected to see higher interest rates soon as its economic expansion is perceived to be sustainable, despite the fact that its leading index for April was at 50, unchanged from March.

There are interest rate decisions in Europe later today. The ECB is widely expected to raise rates, and the better-than-expected 1.4 percent rise in retail sales in the euro zone in April reported yesterday would have boosted those expectations.

The BoE is not expected to raise rates today, although recent economic data from the UK have also been relatively buoyant. A survey has found that the consumer services business expanded at its fastest pace in more than a year in the last three months, while the British Retail Consortium reported yesterday that its shop price index for May showed overall prices were up from April, their first monthly gain so far this year.