User Name: Password:      Register - Lost password?

Forex News Blog
Back to The Headlines
Monday December 1, 2008 - 11:14:15 GMT
Lloyds TSB Financial Markets - www.lloydstsb.com/corporatemarkets

Share This Story:
| | Email

Weekly economic data preview - Bank of England and ECB set to lower interest rates sharply; Economics Weekly - Government borrowing to rise sharpl

Economics Weekly1 December 2008

 

Government borrowing to rise sharply

 

Borrowing to rise sharply with a stimulus package of £20bn…

The Chancellor confirmed in the 2008 Pre-Budget Report (PBR) that the budget deficit is to rise to £118bn next year, or 8% of gdp, a ratio not seen since 1993, and with the sharpest rise in the ratio seen since the 1970s. But the global financial crisis means that the government has little choice but to take debt onto the public sector balance sheet, otherwise the economic slowdown will be even worse and the financial sector could be put at unacceptable risk of systemic failure. But slower economic growth and the inability to therefore raise taxes will push up borrowing to very high levels. The ‘golden rule’ to borrow over an economic cycle only to invest is officially discarded until 2016, when the current budget is expected to balance, but in reality it may not return to that steady state even then. On official projections, net debt will rise to 57% of gdp from 36.3% last year, or more than £1trillion, before starting to decline in 2015/16. In order to stop debt rising, tax increases are planned and slower growth of public spending relative to gdp in the period after the recession ends, expected to be in 2010. However, the tax rise seems small set against the big rise in debt that is expected to take place and the public spending constraint of just 1.2% real growth a year may be difficult to achieve (though in its first two years after being elected in 1997, the current government managed to stick to even tougher spending plans inherited from the conservatives).

 

…leading to worries about how it will be financed in the long term…

These are amongst the highest borrowing figures to be announced since the early 1990s recession, but they are in line with consensus estimates and so likely to be viewed as realistic. Chart b shows that the rise to 57% in the debt/gdp ratio over the period takes it up from very low levels, marking the end of the recent period of historically subdued government borrowing. It will stay high in the years ahead, taking UK debt levels closer to the OECD average of 75% (though still well below). Tax cuts become tax increases after economic recovery is underway in 2010, but in the next financial year (2009/10) borrowing will be £118bn, or 8% of gdp, see chart a. Taxes on households will rise, but only from 2011, and the burden will fall mainly on those earning over £100,000 a year. The fiscal rules – to borrow only to invest and to keep debt below 40% of gdp - have been set aside, see chart b, and may not return as planned in 2015/16, since the tax increases necessary to help make that happens seem small as a share of gdp, see chart d, relative to the sharp increase in borrowing, see chart c. This means that the days of strong increases in public spending in real terms are now over, and spending is planned to grow by just 1.2% a year in real terms, well down on the near 4% pace under the government in the last 10 years. Even so, the strong rise in debt suggests that pressure on the public sector will be intense, as assumptions about efficiency savings and sustained trend economic growth of 2.75% a year from 2011 onwards may be difficult to achieve.

 

…especially since the base line view is dependent on an unlikely quick return to trend economic growth in the medium term once recession is over

Official projections of economic growth are pretty much in line with consensus for this year and next, at 0.8% this year and minus 1% next year. The projection of recovery to about 1¾% in 2010 may be seen as optimistic currently, and trend growth of 2¾% after that as even more unlikely, given the fact of tighter regulation, deleveraging and weaker growth in financial services and the property market. However, a return to trend growth is possible and well within margins of error on forecasts of economic growth that far ahead. The big risk is that if they are wrong, then public sector debt will be even higher and the potential for tax increases even greater, see chart c. Indeed, UK public sector debt will head firmly up towards the international average in the years ahead - though it may take a decade or so to get there, on current trends this is much more likely than not.

 

Company and financial market impact

Companies will overall like the many small measures that were announced in the PBR, but the economic impact of the cut VAT of 2½% to 15% is not clear. Small firms will likely gain more than large from the measures announced. Debt issuance will rise quite sharply and could steepen the yield curve. Initial financial markets reaction was positive, however, with equities up, yields down and the currency stronger. Expectations of official interest rate cuts were largely unaffected. This favourable market view continued in the days immediately after the PBR, see chart e.

Trevor Williams, Chief Economist, Corporate Markets

 

Weekly economic data preview W/c 1 December 2008

 

Bank of England and ECB set to lower interest rates sharply

 

The Bank of England and ECB are poised to reduce interest rates this week, with the respective central banks of Australia and New Zealand also expected to ease policy. In the UK, we expect interest rates to come down by 100bps to 2%, though consensus forecasts range from 1.5% to 2.5%. UK mortgage approvals will confirm weakness in the housing sector, while the PMI surveys will be closely examined to assess the extent to which economic activity and pricing pressures have fallen further. The ECB is expected to cut rates by 50bps to 2.75%, though recent poor business sentiment surveys and the sharp fall in EU-15 CPI to 2.1% in November increase the risk of a larger reduction. The RBA and RBNZ are forecast to cut rates by 75bps and 150bps to 4.5% and 5%, respectively. On Friday, all eyes will be on the US employment report, with non-farm payrolls forecast to fall by 275,000 (consensus: 323,000) and the jobless rate expected to rise to a 15-year high of 6.7%. This should cement further Fed policy easing when the FOMC next meets on December 15/16, perhaps

by 0.5%.

 

We expect the Bank of England MPC to cut interest rates by a further 100bps this week to leave official rates at 2%, matching the all-time low. The economy is expected to have contracted again in the current quarter and is forecast to continue shrinking in every quarter until the second half of next year. Mortgage approvals are predicted to have remained near recent lows of around 30k in October, while growth in mortgage lending and consumer credit will remain weak. The manufacturing and services PMI surveys provide a timely indication of growth and pricing pressures in November and should pave the way for the MPC to cut interest rates aggressively. More generally, a significantly weaker growth outlook, resulting from the risk of widespread insolvency in the global financial system, and sharply lower commodity prices (none of which was generally anticipated and certainly not by any MPC member) mean that CPI inflation is expected to fall below the 2% target next year, providing leeway for further interest rate reductions in early 2009. As chart 1 shows, UK interest rates last month fell below eurozone rates for the first time since the euro's inception and are expected to remain lower throughout 2009.

 

The ECB will lower interest rates from the current 3.25% level this week, but the question is by how much. A reduction to at least 2.75% is likely, though the recent rapid deterioration in business sentiment and the surprisingly large fall in eurozone CPI inflation in November have raised the risk of a larger reduction, perhaps to 2.5% or even 2.25%. Eurostat is expected to confirm that eurozone growth in Q3 fell by 0.2%, the second consecutive quarterly decline, while latest survey evidence, including this week's manufacturing and services PMI, points to further contraction in the current quarter. As usual, markets will focus on ECB President Trichet's comments following the interest rate announcement, including a new set of growth and inflation forecasts, which are expected to be revised down significantly from the previous projections in September.

 

The US Federal Reserve next meets on December 15/16, with incoming data pointing to further reductions in interest rates from the current 1% level, in our view of half a percent to 0.5%. The release of ADP employment figures and ISM surveys may provide clues to the outturn of the official employment report on Friday. We forecast a fall of 275,000 in November non-farm payrolls, which would be the eleventh consecutive decline, with the recent pace of net job losses accelerating from around 75,000 a month in the first half of 2008. The market consensus forecast is for a slightly larger fall of 323,000. The unemployment rate is expected to rise to 6.7% from 6.5%, the highest for 15 years. Weak factory orders data, due for October, will confirm a weak start to the fourth quarter.

Hann-Ju Ho, Senior Economist

0

 

Economic Research,
Lloyds TSB Corporate
Markets,
10 Gresham Street,
London EC2V 7AE
,
Switchboard:
0207 626 - 1500
www.lloydstsb.com/corporatemarkets

 

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."



Elevate Your Trading With The Amazing Trader!

The Amazing Trader includes:
  • Actionable trading levels delivered to YOUR charts in real-time.
  • Live trading strategy sessions.
  • Market Updates with Trading Tools.

Register To Test Your Amazing Trader


Trading Ideas for 18 December 2017

Register for the Amazing Trader

1.

Amazing Trader EVENT RISK Calendar:

Mon 18 Dec
10:00 EZ- final HICP
Tue 19 Dec
09:00 DE- IFO Survey
13:30 US- Housing Starts/Permits
13:30 US- Current Account
Wed 20 Dec
15:00 US- Existing Homes Sales
15:30 US- EIA Crude
Thu 21 Dec
03:00 JP- BOJ Decision
13:30 CA- CPI & Retail Sales
13:30 US Weely Jobless
13:30 US- GDP
Fri 22 Dec
09:30 US- GB- GDP
13:30 US- core PCE Deflator & Presonal Income
15:00 US- New Homes Sales
15:00 US- final University of Michigan
17:00 US- early Closes
Mon 25 Dec
00:00 Christmas Holidays

Forex Trading Outlook


Potential Trading Opportunities

  • POTENTIAL PRICE RISK: Medium Mon--10:00 GMT-- EZ- final November HICP. flash data are rarely changed.


  • POTENTIAL PRICE RISK: HIGH- Medium Tue --09:00 GMT-- DE- IFO Survey. Key report but usually not a market-mover
  • POTENTIAL PRICE RISK: HIGH- Medium- Tue --13:30 GMT-- US- Housing Starts and Permits. Leading indicators of activity

  • POTENTIAL PRICE RISK: HIGH-Medium- Wed --15:00-- US- Existing Homes Sales. Top Housing statistic
  • POTENTIAL PRICE RISK: Medium- Wed --15:30-- US- EIA Crude

John M. Bland, MBA
co-founding Partner, Global-View.com EXCLUSIVE: Global-View Daily Trading Chart Points Updated

EXCLUSIVE: Global-View Free Forex Database updated




TRADER ADVOCACY ARTICLES

Trader's Advocate Articles..

pic

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 Global-View.com.

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

Global-View.com 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 Global-View.com. 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.

 

WARNING: FOREIGN EXCHANGE TRADING AND INVESTMENT IN DERIVATIVES CAN BE VERY SPECULATIVE AND MAY RESULT IN LOSSES AS WELL AS PROFITS. FOREIGN EXCHANGE AND DERIVATIVES TRADING IS NOT SUITABLE FOR MANY MEMBERS OF THE PUBLIC AND ONLY RISK CAPITAL SHOULD BE APPLIED. THE WEBSITE DOES NOT TAKE INTO ACCOUNT SPECIAL INVESTMENT GOALS, THE FINANCIAL SITUATION OR SPECIFIC REQUIREMENTS OF INDIVIDUAL USERS. YOU SHOULD CAREFULLY CONSIDER YOUR FINANCIAL SITUATION AND CONSULT YOUR FINANCIAL ADVISORS AS TO THE SUITABILITY TO YOUR SITUATION PRIOR TO MAKING ANY INVESTMENT OR ENTERING INTO ANY TRANSACTIONS.

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