User Name: Password:      Register - Lost password?

Forex News Blog
Back to The Headlines
Monday April 26, 2010 - 09:37:03 GMT
Lloyds TSB Financial Markets - www.lloydstsb.com/corporatemarkets

Share This Story:
| | Email

Economics Weekly - UK inflation to fall back sharply over the coming year; Weekly economic data preview - US recovery in the spotlight as Treasury sells a record $129bn of paper

Economics Weekly - 26 April 2010

 

UK inflation to fall back sharply over the coming year

 

Recent inflation developments have raised the spectre of a possible resurgence of sustained price pressures in the UK. Since dropping to a low of 1.1% last September, the annual rate of consumer price inflation has risen to 3.4% (see chart a). CPI inflation nhas now been above the government’s 2% target for four consecutive months, with the move above 3% in January prompting the BoE Governor to write an open letter of explanation to the Chancellor, explaining the reasons for the overshoot and the measures being taken to rectify it.

 

It has not only been CPI inflation that has risen noticeably. The rate of change of the broader retail prices index, which includes housing costs, has also rapidly reversed its previous decline. Since posting outright deflation of 1.6% in June 2009, annual RPI inflation has risen to 4.4%, as the fall in mortgage rates in late 2008 and early 2009 have dropped out of the annual comparison, and house prices have recovered.

 

Against the backdrop of rising commodity prices, a weak exchange rate, a recovery in economic activity and unprecedented policy stimulus, the rise in inflation has started to create some unease. There is particular concern that the pick-up in inflation could lead households and businesses to anticipate higher price increases in the future, setting in train a possible upward spiral of cost-push inflation.

 

Over the past year, survey and market based measures of medium- and long-term inflation expectations have remained relatively stable, although in recent months they have started to creep higher (see chart b). The sharpest increase has been in household’s expectations of where inflation is likely to be in twelve months’ time. According to the our latest Lloyds TSB Consumer Barometer, this measure of inflation expectations has risen to 4.5% - a rise of 2.1 percentage points since last November (see chart b).

 

On the face of it, the rise in inflation expectations is concerning. Households inflation expectations, however, are heavily influenced by the prevailing inflation rate - the correlation between the annual CPI and households’ twelve-month inflation expectations is 0.85. For short-term inflation expectations, at least, the line of causation suggests inflation expectations should fall over the coming months if price pressures ease.

 

So what is the outlook for inflation? Although the risks have risen, our central view remains that inflation is likely to fall back sharply over the next twelve to eighteen months. The influences that have pushed inflation higher over the past six months appear to be mostly temporary, such as unfavourable base effects, the reversal of the 2.5 percentage point cut in VAT in January and the lagged response of the consumer price level to the rise in import prices. Unfavourable base effects have been particularly noticeable in fuel prices. Although fuel prices have risen sharply in recent months, the impact on the annual rate of inflation has been magnified by the fall in fuel prices this time last year.

 

Since inflation is a measure of the rate of change of prices, what matters for the inflation outlook is not whether the price level of goods and services rise over the next twelve months, but whether prices rise by more or less than they have over the past twelve months. While a further sharp fall in sterling, another rise in VAT and a renewed acceleration of fuel (and food) prices cannot be ruled out, the most likely outcome is that the impact of these influences will steadily dissipate over the coming year.

 

More generally, the underlying forces shaping the inflation outlook remain benign. As a result of the economic downturn, the UK is operating with significant spare capacity. This spare capacity is manifest in a substantial output gap, estimated to be around 5% of GDP. This spare capacity is most clearly evident in the labour market, with the level of ILO unemployment rising to a 14-year high of 2.5 million in February, or 8% of the labour force. The degree of spare capacity in product and labour markets has kept wage inflation below 2 per cent and has made it difficult for firms to raise prices.

 

Still, there is little doubt that firms are facing growing cost pressures. The fall in the exchange rate, coupled with the increase in commodity prices, has led to a substantial increase in input price inflation. Over the past year, producer input prices have increased by over 10%. As the latest increase in the CPI and the implied retail sales price deflator indicate, some firms have started to try and pass on these cost increases to protect their profits. This is particularly evident in goods prices, which are more sensitive to rising global raw materials costs than service sector prices. Having fallen sharply between 1999 and 2005, goods prices have risen by over 3% over the past year, overtaking the rate of inflation for consumer services (see chart c).

 

Looking ahead, the inflation outlook depends on whether these cost push inflation pressures intensify and, if so, how successful firms are at  passing them on to consumers. While there is a non-negligible risk that import and commodity price inflation continues to intensify, input cost pressures are likely to be overshadowed by the reduction in unit wage costs over the medium term. It seems reasonable to expect the labour market will continue to lag the recovery in economic output, just as it lagged during the economic downturn. If so, productivity growth should rise. For a given level of wage growth, this should put downward pressure on unit wage costs. As chart d shows, unit labour costs have already started to decelerate in response to the cyclical recovery in productivity and we expect this trend to continue.

 

Overall, therefore, we remain of the view that inflation pressures will ease sharply over the medium term. By the end of 2010 and 2011, CPI and RPI inflation are forecast to have fallen to 2.0% and 2.7%, and to 1.2% and 2.2%, respectively. While the risks to inflation from the weakness of the exchange rate and rising global commodity prices should not be underestimated, the underlying inflation environment, remains, we believe, a benign one.

 

Adam Chester, Senior UK Macroeconomist, Corporate Markets

 

Weekly economic data preview 26 April 2010

 

US recovery in the spotlight as Treasury sells a record $129bn of paper

 

 

􀂄 The FOMC interest rate decision on Wednesday provides the event highlight in financial markets this week. Although no change in the fed funds rate is expected, remaining at a record low 0-0.25%, the language used in the press statement will draw close scrutiny. The Fed completed its purchases of mortgage-backed securities and agency debt at the end of March and has closed the majority of its emergency liquidity programmes this year. After providing some key context round the term ‘extended period’ in the March FOMC minutes - that it referred to the evolution of economic data rather than any fixed amount of calendar time - we do not expect to see the phrase removed until later this year. The economic outlook has improved, which we do expect the Fed to reiterate in the press statement, but not sufficiently, we believe, to warrant a hike in the benchmark interest rate until later this year. The other key uncertainty is whether the Fed will sell some of its portfolio of mortgage-backed securities and agency debt before hiking rates - we expect some mention of redressing the balance sheet in the statement. Mr Hoenig is expected to be the sole dissenter for the third straight meeting. We believe there is a strong chance the advance US Q1 GDP growth could exceed the consensus estimate of 3.3% on Friday. Consumer spending has been remarkably robust and the indications are that firms are restocking. We look for an annualised growth rate at 3.8%, down from 5.6% in Q4. Ahead of that, April consumer confidence on Tuesday may also surprise to the upside. In other events, the Treasury will auction a record $129bn in notes this week.

 

􀂄 On Friday, Greece’s Prime Minister George Papandreou announced that “it is a matter of national need to ask officially” for the activation of the emergency financial stability package involving other euro-zone members and the IMF. This announcement represents a victory for financial markets, which had effectively backed Greece into a corner. The prospect of refinancing €8.5bn worth of debt by mid-May at huge yield spreads over German bunds (close to 600bp on the 10-year) never looked realistic, with Moody’s cutting Greece’s credit rating only complicating matters further. With temporary respite on refinancing, Greece must now concentrate on sticking to its fiscal austerity programme – likely in an augmented form as a result of IMF involvement. Meanwhile, this week sees a busy euro-zone data calendar. Highlights include April’s “flash” CPI estimate – where we look for an outturn of 1.5% year-on-year – together with M3 money supply data and March’s unemployment rate. Weak money supply trends continue to feature in the euro area despite better signs from business surveys. Annual loan growth to the non-financial corporate sector, for example, remains deep in negative territory. This is likely to be the case until firms regain sufficient confidence on demand.

 

􀂄 The UK sees a quiet week in terms of economic data releases, following last week’s disappointment on Q1 GDP. The latter was a useful reminder that despite the continuing focus on an Asia-led global recovery, overall credit provision in economies like the UK remains weak, suggesting that a durable pick-up in  domestic activity may still be some way off. In terms of upcoming UK releases, April’s CBI Distributive Trades survey is released on Tuesday, where we look for a net balance of +10 retailers reporting higher sales volumes compared with a year earlier. We note that the annual comparison could be hampered by the timing of Easter last year. Latest Gfk consumer confidence data are also published this week, where we anticipate an outturn of -15, unchanged from March.

Jeavon Lolay, Senior Economist, Mark Miller, Global Macroeconomist

 

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 23 October 2017

Register for the Amazing Trader

1.

Amazing Trader EVENT RISK Calendar:

Tue 24 Oct
All Day flash PMIs
Wed 25 Oct
01:30 AU- CPI
08:00 DE- IFO Survey
08:30 GB- GDP
14:00 CA- BOC Decision
14:30 US- EIA Crude
Thu 26 Oct
11:45 EZ- ECB Decision
12:30 US- Weekly Jobless
14:00 US- Pending Homes Sales
Fri 27 Oct
12:30 US- GDP
14:00 US- final Univ of Michigan

Forex Trading Outlook


Potential Trading Opportunities


  • POTENTIAL PRICE RISK: Medium Tue-- All Day Global flash PMIs. First good look at October economic performances.



  • POTENTIAL PRICE RISK: HIGH Wed-- 01:30 GMT AU- CPI. Top Inflation indicator.

  • POTENTIAL PRICE RISK: HIGH Wed-- 08:00 GMT DE- IFO Survey. Top German indicator.


  • POTENTIAL PRICE RISK: HIGH Wed-- 14:00 GMT CA- BOC Decision. No Policy Change Expected.


  • POTENTIAL PRICE RISK: Medium Wed-- 14:30 GMT US- EIA Crude. Top Weekly WTI Statistic.



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