User Name: Password:      Register - Lost password?

Forex News Blog
Back to The Headlines
Monday December 7, 2009 - 12:25:43 GMT
Lloyds TSB Financial Markets -

Share This Story:
| | Email

Economics Weekly - Is it too soon to start withdrawing QE? Weekly economic data preview - Pre-Budget Report to dominate a particularly busy week for UK data

Economics Weekly - 7 December 2009


Is it too soon to start withdrawing QE?


Quantitative Easing (QE), the purchase of private and public sector debt by the central bank financed by an expansion of its balance sheet, has been in place in the UK since March. Similar policies are also in place in other countries. There appears to be a difference of opinion about whether QE is working or not. Most agree that it has been essential in preventing a financial collapse in early 2009, and in the immediate aftermath of the failure of Lehman Brothers on 16 September 2008. This is not just true for the UK, however. Injections of liquidity (cash) into financial markets by central banks in many other countries were also essential in staving off a global financial calamity.


Now that financial markets have staged a recovery and economic conditions have strengthened, there are those who argue that QE and liquidity injections generally should be withdrawn to avoid another asset price bubble and because they have succeeded in boosting economic growth. Comments from some members of the UK Monetary Policy Committee (MPC) seem to suggest that there is support for this thesis. But is it true that QE has succeeded on all fronts, boosting money supply and kick-starting a sustainable economic recovery? We look at some of the issues in assessing whether QE has succeeded.


Taking the UK as an example, QE started in March 2009, when liquidity appeared to be drying up in the financial markets and policy interest rates were cut to record lows. Businesses in the financial, corporate and personal sectors could not get hold of money at almost any price. This led the central bank to take the decision to directly inject money into the financial sector by buying up gilts and other private sector bonds so that market participants and hence their customers did not fall short of the liquidity required to keep operating. Chart a shows that since then gilts yields have stabilised and equities have recovered. In this sense, QE seems to have worked. It has stabilised financial markets and sparked a recovery in asset prices. Corporate spreads have narrowed sharply; money market interest rates and spreads have also come down substantially. In the absence of QE, company insolvencies would have been higher, debt defaults greater, and personal debt, bankruptcy and unemployment much more than otherwise.


As chart a confirms ,financial markets have recovered since QE started and appear firmly on the mend. Money from central banks’ purchases has found its way into corporate bonds, the stock market, commodities and a range of financial market assets. This improvement in markets has helped companies to refinance themselves at cheaper costs than otherwise, as rising prices for bonds and equities lower the cost of capital. Chart b shows the extent to which companies in the UK have been using capital markets for finance. Since March, there has been a pronounced use of equity and bond issuance to raise finance. Also, continued low interest rates mean that households have more money in their pockets to spend and that has helped to maintain consumer spending and retail sales. This means that global economic growth has turned and recovery is underway. True, the UK economic recovery is lagging that in some other countries, with the US, eurozone and Japan already out of the recession. Emerging market countries have recovered fastest of all. But UK economic recovery now appears likely in Q4. On this thesis, QE has done its job. The path to economic recovery may not be smooth but it should be unstoppable. Hence, QE should be withdrawn before it becomes inflationary.


There are a couple of important problems with this argument, however. One is that the quantity of money is still falling sharply. And not just in the UK, but in the US and euro area as well. Charts c and d show nominal (inflation plus volume) economic growth alongside money supply growth. If QE was working so successfully, why is money supply contracting? It begs the question of whether there can be a sustainable economic recovery when money supply is shrinking in this way. Many would argue that it is not possible. Not all would agree, however, as the economy may simply settle at a lower level of activity and growth still occur. But if money supply is still contracting in February 2010 when the current allocation of QE is used up, will the MPC really stop purchasing securities from the private sector?


A second major issue is that households and companies are severely cutting back on borrowing or are repaying debt outright. This means that economic growth from investment and household consumption will remain weak, perhaps threatening economic recovery. The next series of charts, e, f and g show this trend occurring in the US, UK and eurozone economies, posing a challenge to policy makers in these countries. Do they withdraw the extraordinary policy measures put in place to inject liquidity into the economy, and keep down the costs of borrowing and servicing debt, when economic growth appears so fragile? At present, this still seems a delicately poised decision. It is not one that leads to the certainty that policy loosening will be withdrawn in short order. Signs of economic recovery currently being seen might start to wither if monetary policy  tightened too soon.

Trevor Williams, Chief Economist, Corporate


Editorial comments to:

Trevor Williams

Chief Economist

Lloyds TSB Corporate Markets

Economic Research

10 Gresham Street

London, EC2V 7AE

Tel: +44 (0)20 7158 1748


Weekly economic data preview - 7 December 2009


Pre-Budget Report to dominate a particularly busy week for UK data


􀂄 This week sees a particularly busy calendar in the UK, featuring the Chancellor’s Pre-Budget Report (PBR) and the latest Monetary Policy Committee (MPC) meeting. We look for Bank Rate to remain on hold at 0.5% while the MPC continues with its £200bn programme of asset purchases. The PBR, meanwhile, will be closely-watched as markets focus on government efforts to consolidate the public finances. Elsewhere, there is no shortage of economic data and events taking place in the US. Here, the main highlights include October trade data, latest weekly jobless claims figures, November retail sales and December’s preliminary Michigan consumer confidence survey. Following last week’s ECB monetary policy deliberations, the euro-zone sees a somewhat quieter week in terms of economic data. With little in the way of aggregate euro-zone data scheduled for release, attention this week turns instead to German, French and Italian industrial production figures.


􀂄 With UK monetary policy decisions currently being made on the basis of fiscal policy formulated back in April’s Budget, this week’s PBR will be among the most closely watched in years. If the Treasury’s PSNB projection for 2009/10 of £175bn looked bad in April, recent monthly data on the public sector finances suggest it could look even worse come Wednesday. Clearly, the bigger picture is how to achieve the goal embodied in the recent Fiscal Responsibility Bill – of halving the fiscal deficit within four years. On the revenue side, much of the build-up to the PBR has centred on a prospective increase in taxation for high earners. Possibilities include a widening in the scope of the new 50p top rate of income tax, increasing National Insurance contributions for top rate taxpayers and also various measures to boost revenue via the Inheritance Tax system. In terms of spending, numerous government departments are likely to see budgets pared back significantly compared with the growth seen in previous years. While the PBR is likely to dominate events in the UK this week December’s MPC meeting will, as ever, be carefully watched by financial markets. We look for Bank Rate to remain on hold at 0.5% while the £200bn programme of asset purchases – aimed at boosting nominal economic activity in the economy - continues. Importantly, October UK industrial production data are released this week, where we look for a 0.4% month-on-month increase. But the figures take on added significance, since the October data will provide a guide to Q4 gdp.


􀂄 In the US, ahead of the next FOMC meeting on 16 December, this week features a wave of important economic data including trade, retail sales, initial jobless claims and December’s preliminary University of Michigan consumer confidence survey. We look for the US trade deficit to narrow to $32bn in October, in part reflecting US dollar weakness. Meanwhile, last week’s better-than-expected non farm payrolls figures have prompted a more optimistic mood in terms of labour market prospects. We think that this Thursday’s (less high-profile) data on initial jobless claims will show a small (7k) decline, so keeping the four-week moving average on the downward path seen since March. Retail sales figures for November are published on Friday, where we look for a 0.5% m/m rise in the exautos measure. If realised, this would be the fourth consecutive month-on-month increase. But household balance sheet adjustment, continuing job losses and the recent expiry of the so-called ‘cash-for-clunkers’ incentive scheme does not augur particularly well for consumer activity heading into 2010.


􀂄 There are relatively few euro-zone economic statistics scheduled for publication this week, so attention will shift to various national indicators. Industrial production figures for Germany, France and Italy are all due for release. In Germany, we look for industrial production to rise by 1.2% in October, with robust demand for investment goods as global economic recovery continues, led by emerging Asia. In France and Italy, we also envisage significant month-on-month rebounds in industrial output, of 0.6% and 1.7%, respectively.

Mark Miller, Global Macroeconomist



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

Mon 10 Sep 2018
AA 08:30 GB- GDP, Trade, Output
Tue 11 Sep 2018
AA 08:30 GB- Employment Decision
A 09:00 DE- ZEW Survey
Wed 12 Sep 2018
A 12:30 US- PPI
A 14:30 US- EIA Crude
A 18:00 US- Beige Book
Thu 13 Sep 2018
A 1:30 AU- Employment
AA 11:00 GB- Bank of England Decision
AA 11:45 EZ- European Central Bank Decision
A 12:30 US- Weekly Jobless
AA 12:30 US- CPI
Fri 14 Sep 2018
A 08:30 GB- GDP
AA 12:30 US- Retail Sales
A 13:15 US- Industrial Production
AA 14:00 US- prelim University of Michigan

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