User Name: Password:      Register - Lost password?

Forex News Blog
Back to The Headlines
Monday February 8, 2010 - 17:15:58 GMT
Lloyds TSB Financial Markets -

Share This Story:
| | Email

Economics Weekly - Recovery in UK exports holds key to future growth; Weekly economic data preview - BoE MPC to provide further detail behind decision to halt QE

 Economics Weekly - 8 February 2010


Recovery in UK exports holds key to future growth


The sharp fall in sterling over the past three years and the nascent signs of recovery in the global economy provide an opportunity for growth that the UK cannot afford to miss. With the household and corporate sectors weighed down by high levels of indebtedness, and the public sector about to embark on a substantial fiscal squeeze, the prospect of a meaningful recovery in domestic demand over the coming years is, we believe limited. Instead, to achieve a reasonably strong and sustained rate of growth means it is not only desirable, but essential, that the UK rebalances away from debt driven domestic demand towards net exports. The competitive boost provided by the fall in sterling, and the steady recovery in global demand, provide this opportunity.


Since peaking in January 2007, sterling’s trade weighted index has fallen by around twenty-five percent. While the trade-weighted exchange rate has recovered a little over the past year, the overall decline over the past three years represents the largest correction in the exchange rate since the UK withdrew from the ERM in the early 1990s. As chart a shows, the decline in sterling has been most acute against the yen, with GBP/YEN having dropped by around almost 70% over this period. Nonetheless, against the US dollar, euro, Swiss franc, and a host of emerging market currencies, sterling has also fallen sharply.


To the extent that a fall in the exchange rate raises import prices and lowers export prices, one might expect the fall in sterling to be associated with a marked improvement in the UK’s trade position (the difference between the amount we export and import, in current prices). But, as chart b shows, the improvement in the UK’s trade balance in recent years has been relatively modest.


Since early 2007, the UK’s total trade deficit in goods and services as a proportion of gdp has improved by just over 1 percentage point (pp) to 2.2%, driven by a reduction in the visible (goods) trade deficit. While the current trade deficit is not out of line with the experience of the last decade, it remains troubling that the UK export sector has not yet responded more strongly to the fall in the exchange rate, particularly given the fragile backdrop to domestic demand. This is particularly so, as a large part of the improvement in the UK’s trade deficit has been the result of a sharp fall in imports, reflecting weak demand conditions at home. This source of improvement cannot be sustained indefinitely, and a meaningful recovery in the UK’s export performance will be required if the trade balance is ultimately to move back into surplus territory - as it did briefly in the mid-1990s, following sterling’s exit from the ERM.


So why has the UK’s trade position not improved more sharply? Part of the reason may be that the competitive boost has occurred against the currencies of those countries which undertake relatively little trade with the UK (see chart c). For example, UK exports to Japan, Switzerland and Brazil account for only 4% of total exports.


However, against the currencies of our largest trading partners - the major euro zone countries and the US - the drop in the exchange rate has still been substantial. Against the euro and US dollar, sterling has dropped by around 25-30% since earlty 2007 - far more than it has against many of the developing economy currencies. It seems that rather than increasing market share, therefore, UK exporters have used the opportunity of the weaker exchange rate to rebuild profit margins. Indeed, over the past three years, export prices have risen by almost 25% (se chart d).


The UK’s terms of trade is the ratio of its export prices to its import prices. As such, it measures how many units of imports the UK can buy with one unit of exports. Other things being equal, a fall in the exchange rate might be expected to lead to a deterioration (i.e. fall) in the UK’s terms of trade, as import prices rise and export prices fall (and vice versa). As chart d shows, however, the UK’s terms of trade has actually improved slightly over the past three years. In other words UK export prices have risen relative to import prices, despite the fall in sterling’s exchange rate over this period. The improvement in the terms of trade, it seems, has limited the recovery in UK export volumes.


The experience of the past three years contrasts with the experience of the UK in the early 1990s, when export volumes responded more aggressively to the fall in the exchange rate. Indeed, it was the boost to UK net trade during this period that was instrumental in raising real incomes and bringing the UK out of recession. It remains to be seen whether the same will occur this time around. It may not if export prices do not fall. However, the lags between exchange rate movements impacting on trade volumes can be substantial. Companies, for example, may be locked in to multiyear fixed price contracts; they may be wary about lowering their export prices for fear that the decline in the exchange rate could be short-lived; and/or they may need to widen margins to help protect their balance sheets.


Notwithstanding the above, we are hopeful that the UK will respond to the opportunities that arise from the fall in sterling and the signs of global economic recovery. Indeed, the marked improvement in the export orders balances of the latest CBI SME Trends and manufacturing PMI surveys provide grounds for

optimism. According to the January PMI survey, manufacturing export orders are currently at their highest level since this data were collected in 1996. Although the share of manufacturing in gdp has fallen markedly over the past thirty years, there remain many industries, in both the goods and services sectors, in which the UK has a comparative advantage - chemicals, business & financial services, engineering and biosciences, to name but a few. If the UK is emerge from the downturn with a stronger and more stable economy over the medium to longer term, it is essential that this rebalancing away from domestic consumption towards net exports occurs.

Adam Chester Senior UK Macroeconomist


Editorial comments to:

Trevor Williams

Chief Economist

Lloyds TSB Corporate


Economic Research

10 Gresham Street

London, EC2V 7AE

Tel: +44 (0)20 7158 1748


Weekly economic data preview - 8 February 2010


BoE MPC to provide further detail behind decision to halt QE


􀂄 Following on from last week’s decision by the MPC to halt its programme of quantitative easing, attention will shift to the detail of its quarterly Inflation Report (published on Wednesday), which would have been a key input into the MPC’s deliberations. Key themes arising from the statement accompanying the policy decision announcement was that the Committee thought recent monetary policy initiatives would continue to “impart a substantial monetary stimulus” to the economy, although it acknowledged that should the recovery falter, it could restart the programme of asset purchases. We expect the detail of the Inflation Report to strike the same tone and show that the MPC is very much in “wait and see” mode. On dataflow, the BRC retail report is released on Tuesday. The January CBI retail report was downbeat, with the VAT rise and inclement weather negatively impacting activity. Our forecast for a two percentage point fall in the annual rate of BRC total sales growth (to 4%) is also a reflection of these factors. We expect the headline trade balance (also Tuesday) to be unchanged at £6.7bn, while industrial production data (Wednesday) are expected to post a 0.3% decline in December. That would be consistent with the sectoral output data within the ONS’s preliminary GDP estimate released last month, which showed that the industrial sector grew 0.1% over Q4.


􀂄 Financial markets will be closed in the US on Monday for the Presidents’ Day holiday. Although there are no major economic releases on Tuesday, the sale of $40bn of 3yr notes by the Treasury will be closely watched. Given the recent weakness of global equities, we expect to see strong appetite from investors. The main data highlight this week is provided by the January retail sales figures on Thursday, which will provide an early pointer for consumer spending and growth prospects in the first quarter. We look for a modest gain of 0.3% in headline retail sales and excluding autos of 0.5%, rebounding after surprise falls in December. It is worth highlighting though that the monthly data are notoriously volatile. The University of Michigan consumer sentiment index, published on Friday, is expected to show a further modest gain in February, reflective of the improving labour market. We expect the headline index to breach the 75 level

for the first time since January 2008. However, after the news of a further fall in non-farm payrolls last month, focus will also be on the latest initial jobless claims data on Thursday, particularly following the surprise gain seen last week. We look for a sharp fall to 445K in the week to February 6, from 480k previously. The other major release in the US this week is the December trade balance on Wednesday. We look for a modest narrowing in the trade deficit to $36bn, from $36.4bn, on stronger exports. The data will also be used to refine estimates of US Q4 2009 GDP growth.


􀂄 At the recent ECB’s press conference, Jean-Claude Trichet was noticeably more upbeat on the subject of Greece and the efforts being made to repair its public finances. So there was more than a touch of irony when stock and bond markets registered significant falls shortly afterwards, apparently on the back of concerns over contagion effects from the eurozone periphery. As far as the spread of 10-year government bond yields over equivalent bunds is concerned, Portugal and Spain have also moved into the limelight. Preliminary Q4 GDP releases feature strongly in this week’s euro-zone economics data calendar. At the aggregate euro area level, we look for an outturn of +0.4% quarter-on-quarter, yielding an annual rate of -1.9%. National data from Germany, France and Italy are published on the same day, Friday. Broadly speaking, exports and inventories remain the key drivers of euro-zone economic activity, although these components clearly do not guarantee seamless recovery. Other economic releases include December industrial production figures for the euro-zone (along with national data for Germany, France and Italy).

George Johns (UK Macroeconomist), Jeavon Lolay, (Senior Global Macroeconomist, 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

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