User Name: Password:      Register - Lost password?

Forex News Blog
Back to The Headlines
Monday October 20, 2008 - 10:08:04 GMT
Lloyds TSB Financial Markets -

Share This Story:
| | Email

FX Research - Weekly economic data preview - UK economy may have contracted in Q3; Economics Weekly - Uncertain outlook for UK economy

Economics Weekly  20 October 2008


Uncertain outlook for UK economy


Financial market turmoil makes economic forecasts even more uncertain than usual...

The prospects for UK economic growth have deteriorated sharply in the last two months. The main reason for this relate to the higher than expected level of price inflation which has hit consumer incomes and company profits badly and so is leading to weaker consumer and investment spending. In addition, the intensification of the credit crisis - the loss of confidence in financial markets nthat is reflected in sharp falls in share prices and housing markets - is adding a more worrying twist to the outlook. This makes forecasting economic variables and outcomes even more fraught than usual. In a recent Weekly, we looked at how projections of economic growth 1 year ahead performed in the last decade and noted that the average error in predicting gdp growth was 1 percentage point, see table 1.


...and a single view for the year ahead is almost certainly likely to prove incorrect

Point estimates in the current period of extreme uncertainty and market turmoil are far less likely to be accurate, or useful, than even the usual 1 percentage point error, which itself is an average. For this reason, using a range of possible outcomes is likely to be better than any point estimate, and these are likely to have very similar probabilities attached to them as well. In other words, instead of being much more confident about a central outlook than any other possible outcome, it may be that a significantly different forecast can have a very similar confidence attached to it. The reasoning is that, given how great volatility is, the central view could be quite different from the view of a month earlier that at the time seemed most likely.


This is true for a range of key UK economic variables...

What does this view imply for forecasts of some key UK economic indicators for 2009? The range of outcomes for economic growth in 2009 is broad, between +1.5% and -1.9%, with an average of -0.2% for the full year, based on consensus economic forecasts made in October. This range is outside the 10- year average error of 1 percentage point - based on a central forecast of -0.2%, any outcome between +0.8% and -1.2% is equally likely – but, given the huge uncertainty currently, one would expect this to be the case. Indeed, it could be argued that the forecast range in October is not wide enough. In this regard, it is worth noting that the directional accuracy was only correct 77% of the time and that the actual accuracy of the point estimate over the 10 year period we looked at was zero, see table 1. In short, at no time in the 10 year period did the consensus forecast correctly predict the actual outcome. Other variables in the forecast for next year are equally subject to this uncertainty. In the charts below we show the standard deviation of economic growth, household consumption and consumer price inflation. These show that private sector consumption may rise by 0.5% or fall by 0.5%. Also that price inflation could fall back below 2% before the end of 2009 or it could end the year above 3%. It should be remembered that there is also a 23% chance, or nearly 1 in 4, that the direction of the forecasts for next year is wrong as well. This leaves a huge range and implies that the outcome for interest rates in 2009 is equally wide, from a range of 2.5% to 4.5%. With all the current uncertainty, point estimates in our view are simply not very useful and a range of possible outcomes would serve analysis best going forward, especially for financial planning purposes, as what seems plausible or implausible now could easily switch around next month as conditions change.


...making a better approach to have a range of most likely outcomes as the basis for planning

Hence, our views about the most likely outcome for the UK next year should be seen in this light; it is just what seems like the single most likely outcome now, but other outcomes are also almost equally likely at this time of such huge turmoil and uncertainty. Nevertheless, there is clearly a lot of pessimism about the UK economy and this is reflected in the consensus forecast of -0.2% gdp growth in 2009. This suggests that output will fall but not as deeply as in the early 1990s. We would tend to concur with this view, but expect a slightly stronger number on the basis that the authorities seem prepared to use fiscal, monetary and regulatory instruments to ensure that a deep recession does not occur. For this reason, we believe that interest rates are likely to be cut to 4% by the end of the year, possibly in November. (Why wait? If the authorities are prepared to act to prevent a fall in output, the sooner they do the better).


In conclusion, expect considerable variability in actual outcomes in 2009 compared with forecasts

For us, this would mean that the UK economy may experience a technical recession - six months of falling output – for the first time since the early 1990s. However, it may be that there is only 1 quarter when growth falls but the economy stagnates for up to nine months, both are consistent with modest economic growth in annual terms. So, either economic conditions improve in the next few months, and we avoid recession or they do not and the economy contracts by up to 1% in 2009, see chart d. This would clearly give a different outcome for interest rates and exchange rates. In that scenario, Bank rate would be cut to 3% in 2009. If not, we expect that it stays at 4% for most of the year. This may mean that sterling could fall even further below our end 2009 central forecast of $1.58, which is based on base rates of 4%. But the key point is that a number of very different outcomes are very possible for 2009 and forecasts are particularly prone to be wrong, however plausible they may seem at the moment.

Trevor Williams, Chief Economist, Corporate Markets


Weekly economic data preview W/c 20 October 2008


UK economy may have contracted in Q3


The preliminary release of UK Q3 gdp and developments in the money and equity markets will command most attention this week. A negative outcome for gdp growth is widely forecast and would probably add pressure on the Bank of England to further reduce interest rates in November. The release of the October MPC minutes on Wednesday should give further indication of how close the Bank is to relaxing monetary policy in the light of a darkening economic backdrop and heavy losses in equities. In the US, Fed chairman Bernanke testifies on the economy on Monday where his

assessment may shape expectations with regard to the FOMC meeting next week. In the euro zone, we forecast further falls in the preliminary PMI surveys of activity in the manufacturing and services sectors.


• Signs of some thawing in UK money markets occurred last week and offered some cautious optimism that the coordinated central banks actions to provide liquidity is starting to bring back some life in the inter-bank market. However, the decline in Libor rates is still mostly concentrated in the very short-term maturities, where for example overnight rate fell by more than 60bps last week. By contrast, the much smaller 10bps drop last week in 3-month Libor to 6.16% is illustrative of continuing unwillingness to lend for longer periods. Tight credit conditions and record high inflation are likely to have caused business investment to shrink for a 2nd successive quarter and consumer spending to stagnate or fall, causing the UK economy to contract in Q3 for the first time since Q2 1992. Our forecast of a 0.2% q/q drop follows the stagnation in growth in Q2 and puts the economy in the position of having a technical recession (6 consecutive months of falling output). We expect Q3 growth to have slowed to 0.5% y/y from 1.5% y/y in Q2. Rising unemployment and falling wage growth will help to bring down inflation, the BoE's main objective, but could cause more economic pain in the interim. The collapse in oil and other commodity prices should help to alleviate inflation pressures, and assisted by below trend gdp growth, explains why BoE MPC members voted for a rate cut. How this is changing the tone of MPC policy discussions will emerge in the October MPC minutes, due on Wednesday. Market participants will pay particular interest to the votes of MPC members Sentance and Besley, and the Bank's latest appraisal of the growth and inflation perspectives to judge whether another rate cut is imminent following the emergency reduction in base rate two weeks ago. Another cut of 0.50% now looks likely in November. The CBI industrial trends survey will be published on Tuesday and September retail sales data are due on Thursday. UK public finances have come under close scrutiny this month as a result of the government's capital infusion in some of the country's banks. The September figures may show a significant deterioration in tax receipts and higher borrowing. Unless this is matched by falls in expenditure, we expect the cumulative PSNCR deficit to rise to £18.6bn for the (fiscal) year-to-date, £5bn ahead compared to the same period last year.


• A quiet week for US economic data means the thrust of attention will be on Fed chairman Bernanke's testimony on the economy on Monday and company earnings through the course of the week. Very weak economic releases for retail sales and manufacturing activity last week underlined the likelihood that the US economy shrank in Q3, an outcome that may lead the Fed to again cut interest rates at the FOMC meeting next week. Mr Bernanke cast a gloomy outlook on the economy at a speech last Wednesday when he said that a 'broader economic recovery will not happen right away', even if recent actions by the central bank help to stabilise financial markets. Weekly initial claims are due on Thursday and may indicate whether the labour market is stabilising. Last week's claims data showed a drop to 461,000.


• Prospects of further interest rate cuts will also be debated in the euro zone this week where the flash PMI indices for October are published on Friday. Business and consumer confidence have taken a severe knock in the wake of the banking crisis and with demand for new business and employment prospects dimming, we expect the PMI indices to have fallen again in October. Taking on board the easing in inflation pressures - euro zone CPI slowed to 3.6% in September - this could make some ECB members more inclined to vote for lower interest rates in November or December.

Kenneth Broux, Economist


Economic Research,
Lloyds TSB Corporate
10 Gresham Street,
London EC2V 7AE
0207 626 - 1500


Any documentation, reports, correspondence or other material or information in whatever form be it electronic, textual or otherwise is based on sources believed to be reliable, however neither the Bank nor its directors, officers or employees warrant accuracy, completeness or otherwise, or accept responsibility for any error, omission or other inaccuracy, or for any consequences arising from any reliance upon such information. The facts and data contained are not, and should under no circumstances be treated as an offer or solicitation to offer, to buy or sell any product, nor are they intended to be a substitute for commercial judgement or professional or legal advice, and you should not act in reliance upon any of the facts and data contained, without first obtaining professional advice relevant to your circumstances. Expressions of opinion may be subject to change without notice. Although warrants and/or derivative instruments can be utilised for the management of investment risk, some of these products are unsuitable for many investors. The facts and data contained are therefore not intended for the use of private customers (as defined by the FSA Handbook) of Lloyds TSB Bank plc. Lloyds TSB Bank plc is authorised and regulated by the Financial Services Authority and is a signatory to the Banking Codes, and represents only the Scottish Widows and Lloyds TSB Marketing Group for life assurance, pension and investment business.






Forex Trading News

Forex Research

Daily Forex Market News
Forex news reports can be found on the forex research headlines page below. Here you will find real-time forex market news reports provided by respected contributors of currency trading information. Daily forex market news, weekly forex research and monthly forex news features can be found here.

Forex News
Real-time forex market news reports and features providing other currency trading information can be accessed by clicking on any of the headlines below. At the top of the forex blog page you will find the latest forex trading information. Scroll down the page if you are looking for less recent currency trading information. Scroll to the bottom of fx blog headlines and click on the link for past reports on forex. Currency world news reports from previous years can be found on the left sidebar under "FX Archives."

Actionable trading levels delivered to YOUR charts in real-time.

Register To Test Your Amazing Trader

GVI Trading. Potential Price Risk Scale
AA: Major, A: High, B: Medium

Tue 31 July 2018
AA JP- Bank of Japan
A 06:00 DE- Retail Sales
A 09:00 EZ- flash HICP/GDP
AA 12:30 US- Core PCE Deflator
A 14:00 US- CB Consumer Confidence
Wed 1 Aug 2018
A Final Mfg PMIs
AA 12:15 US- ADP Private Payrolls
A 15:00 US- EIA Crude
AA 18:00 US- Federal Reserve Decision
Thu 2 Aug 2018
AA 11:00 GB- Bank of England Decision
A 13:30 US- Weekly Jobless
Fri 3 Aug 2018
A Final Services PMIs
AA 12:30 US- Employment
A 12:30 US/CA- Trade

John M. Bland, MBA
co-founding Partner,

Global-View Affiliate Program

We are starting an affiliate program to market some of our products.

Send me an email if you would be interested or if you know someone who would like to be an affiliate. Generous commissions payout for those accepted.

Put the word "affiliate" in the email subject line.

Contact us

Start trading with forex broker Markets Cube

Max McKegg's Daily Forex Trading Forecasts

Veteran FX Trader, Max McKegg, forecasts all the Major currencies and the Australasians; providing Daily and Medium Term Trading forecasts to subscribers, who include large Banks the world over, as well as individual traders in more than 30 different countries.

Request a TRIAL of Max's Forex Service.


Retail Forex Brokerage Changing!

Are you looking for your first broker or do you need of a new one? There are more critical things to consider than you might have thought.

We were trading long before there were online brokers. Global-View has been directly involved with the industry since its infancy. We've seen everything and are up-to-data with recent regulatory changes.

Our Best Brokers listing section includes:Forex Broker Reviews, Forex Broker Directory, Forex Broker Comparisons and advice on How to Choose a Forex Broker

If would like guidance, advice, or have any concerns at all ASK US. We are here to help you.

SEE Our Best Brokers List

Currency Trading Tools

  • Live rates, currency news, fx charts. 

  • Research reports and currency forecasts.

  • Foreign Exchange database and history.

  • Weekly economic calendar.

Directory of  Forex trading tools

Terms of Use    Disclaimer    Privacy Policy    Contact    Site Map

Forex Forum
Forex Trading Forum
Forex Forum + forex rates
Forex Forum Archives
Forex Forum RSS
Free Registration

Trading Forums
Currency Forum Guide
Forum Directory
Open Forum
Futures Forum
Political Forum
Forex Brokers
Compare Forex Brokers
Forex Broker News
Forex Broker Hotline

Online Forex Trading
Forex Trading Tools
Currency Trading Tools
Forex Database
FX Chart Points
Risk/Carry Trade Chart Points
Economic Calendar
Quicklinks to Economic Data
Currency Futures Swaps
Fibonacci Calculator
Currency Futures Calculator

Forex Education
Forex Learning Center
FX Trading Basics Course
Forex Trading Course
Forex Trading Handbook

Forex Analysis
Forex Forecasts
Interest Rate Forecasts
Central Bank Forecasts

FX Charts and Quotes
Live FX Rates
Live Global Market Quotes
Live Forex Charts
US Dollar Index Chart
Global Chart Gallery
Daily Market Tracker
Forex News
Forex Blog
Forex News
Forex Blog Archives
Forex News RSS
Forex Services
Forex Products
GVI Forex
Free Trials
FX Bookstore
FX Jobs and Careers
Jobs USA
Jobs UK
Jobs Canada

Forex Forum

The Global-View Forex Forum is the hub for currency trading on the web. Founded in 1996, it was the original forex forum and is still the place where forex traders around the globe come 24/7 looking for currency trading ideas, breaking forex news, fx trading rumors, fx flows and more. This is where you can find a full suite of forex trading tools, including a complete fx database, forex chart points, live currency rates, and live fx charts. In addition, there is a forex brokers directory where you can compare forex brokers. There is also a forex brokers hotline where you can ask for help choosing a forex broker that meets your individual fx trading needs. Interact on the same venue to discuss forex trading.

Forex News

The forex forum is where traders come to discuss the forex market. It is one of the few places where forex traders of all levels of experience, from novice to professionals, interact on the same venue to discuss forex trading. There is also the GVI Forex, which is a private subscription service where professional and experienced currency traders meet in a private forex forum. it is like a virtual forex trading room. This is open to forex traders of all levels of experience to view but only experienced currency tradingprofessionals can post.

Currency Trading

Currency trading charts are updated daily using the forex trading ranges posted in the Global-View forex database. You will also find technical indicators on the fx trading charts, e.g. moving averages for currencies such as the EURUSD. This is another forex trading tool provided by

Forex Brokers

The forex database can be used to access high, low, close daily forex ranges for key currency pairs, such as the EURUSD, USDJPY, USDCHF, GBPUSD, USDCAD, AUD, NZD and major crosses, including EURJPY, EURGBP, EURCHF, GBPJPY, GBPCHF and CHFJPY. Data for these currency trading pairs dating back to January 1, 1999 can be downloaded to an Excel spreadsheet.

Forex Trading

Forex chart points are in a currency trading table that includes; latest fx tradinghigh-low-close range, Bollinger Bands, Fibonacci retracement levels, daily forex pivot points support and resistance levels, average daily forex range, MACD for the different currency trading pairs. You can look on the forex forum for updates when one of the fx trading tools is updated.

FX Trading

Global-View also offers a full fx trading chart gallery that includes fx pairs, such as the EURUSD, commodities, stocks and bonds. In a fx trading world where markets are integrated, the chart gallery is a valuable trading tool. Look for updates on the Forex Forum when the chart gallery is updated.

Forex Blog also offers a forex blog, where articles of interest for currency trading are posted throughout the day. The forex blog articles come from outside sources, including forex brokers research as well as from the professionals at This forex blog includes the Daily Forex View, Market Chatter and technical forex blog updates. In additional to its real time forex forum, there are also Member Forums available for more in depth forex trading discussions.



By using this website, you are agreeing to our Privacy Policy and Terms of Use, and Cookie Policy

Copyright ©1996-2014 Global-View. All Rights Reserved.
Hosting and Development by Blue 105