User Name: Password:      Register - Lost password?

Forex News Blog
Back to The Headlines
Monday October 18, 2010 - 10:11:12 GMT
Lloyds TSB Financial Markets -

Share This Story:
| | Email

Economics Weekly - UK Economic Update: Downside risks argue for further stimulus; Weekly economic data preview - Like the US Federal Reserve, the MPC is positioning for a further bout of QE...

Economics Weekly - 18 October 2010


UK Economic Update: Downside risks argue for further stimulus


In this week’s commentary, we summarize our  latest UK economic forecasts, outlined in more detail in our recently published Q4 UK Economic Bulletin.


A fragile recovery

While we expect a recovery of sorts to continue, the challenges to growth remain formidable. Forthcoming public spending cuts - to be unveiled in more detail in Wednesday’s Spending Review - declining household disposable incomes and ongoing deleveraging will likely act as a major constraint on domestic demand growth next year.


As the government attempts to wean the UK off its reliance on public spending, a number of surveys - including our own - suggest GDP growth has softened noticeably since the summer (see chart a). Having posted a surprisingly robust 1.2% quarterly gain in Q2 – its strongest rise in a decade - quarterly GDP growth in both the third and fourth quarters is on track to slow to, or below, 0.5%. If realised, this would leave GDP growth for 2010 as a whole at around 1.6%. Although a marked improvement from the  4.9% contraction posted in 2009, this is well below the rates of growth that typically occur in the early stages of recovery.


Looking ahead, the typical recovery in stocks that accompanies economic recovery is likely to continue, but at a slower pace, as firms approach their desired inventory levels. Moreover, the consumer sector is likely to remain weighed down by stagnant income growth, high levels of debt, tight credit conditions and the looming prospect of renewed job losses. Lastly, the contribution to growth from the public sector looks set to weaken, as the government spending cutbacks start to bite.


This leaves business investment and net trade as important growth engines (see chart b). Companies’ growing financial surpluses, coupled with the historically low cost of credit, leave the corporate sector well placed to finance pent-up demand for business investment postponed during the downturn. Moreover, the recovery in global growth and the lagged impact of a weaker exchange rate should, with time, drive a more meaningful improvement in the UK’s net trade performance. More generally, loose monetary policy should provide ongoing support to the more interest rate sensitive sectors.


Overall, our central forecast is that GDP growth will continue to make modest headway – we expect GDP to grow by close to 2% in 2011. This is highly contingent, however, on the premise that cuts in public spending will promote private spending - and meaningful contributions from business investment and net trade.


We accept, however, that this is far from assured. Given the improvement in corporate balance sheets, there is little evidence that the public sector has been crowding out private sector investment. Despite the improvement in their balance sheets, it is questionable whether companies will embark on a substantial investment spend given the prevailing degree of spare capacity and the continued uncertainty over the economic outlook. Moreover, the recent volatility in sterling’s exchange rate, and signs that global growth may be starting to flag, could continue to delay an export-led recovery.


Inflation set to fall

In September, the annual CPI inflation rate was unchanged at 3.1%, the tenth consecutive month that headline inflation has been above the government’s 2% target (see chart c). Various reasons have been cited for its resilience. First and foremost has been the lagged impact of sterling’s exchange rate.


Although sterling’s trade-weighted exchange rate is currently around the same level as a year ago, it is around 25% lower than it was in mid 2007. Since the UK is a highly open economy - imports account for around 30% of GDP – the lagged fall in the pound has led to a sharp rise in import prices. Since mid 2007, import prices have risen by around 20%. We estimate this rise in import prices may have added up to 1.4pp to the rise in the CPI over the past year.


The reversal of the December 2008 2.5pp cut in VAT in January 2010 has also impacted on the rate of inflation. Retailers’ efforts to raise margins, and rising food and commodity prices, have also been factors. Over the short term, rising food prices are likely to continue to impact, while the 2.5pp rise in VAT in 2011 will serve to keep the headline rate of inflation relatively elevated through 2011. Nevertheless, inflation is expected to ease gradually over the coming year, before falling sharply in early 2012 as the January 2011 rise in VAT drops out of the annual comparison.


More generally, we believe the inflation outlook is benign. The overhang of spare capacity is likely to put steady downward pressure on domestic price inflation over the medium term, particularly given the outlook for wage growth and unit labour costs. Over the past year, average earnings (ex bonuses) have risen by only 1.6%, while the growth in unit labour costs has slowed towards zero. Furthermore, in the absence of an exchange rate shock, the impact of the earlier fall in the pound on import prices should steadily fade.


More QE?

Given our conviction that the recovery in UK GDP growth is likely to remain fragile and that inflation pressures are likely to dissipate, we have pushed out our forecast for the first rise in UK Bank rate until Q4 2011, with only a gradual tightening thereafter. By end 2012 and 2013, Bank rate is forecast to be 2.5% and 3.5%, respectively.


Indeed, market attention currently centres on the possibility that more, not less, monetary stimulus is required. If the forthcoming economic data confirm the downturn signalled in recent leading indicators, the Monetary Policy Committee (MPC) is likely to embark on a further round of Quantitative Easing (QE) in coming months. The scale and form any further QE takes remains uncertain, although our best guess is the Committee will increase the APF program by a further £50bn or so, with asset purchases again targeted mainly at the gilt market.


Adam Chester

Head of UK Macroeconomics



Weekly economic data preview - 18 October 2010


Like the US Federal Reserve, the MPC is positioning for a further bout of QE...


There are two events this week that have the capacity to significantly shift sentiment in the sterling interest rate and FX markets. Both are released on Wednesday. First are the minutes of October’s Monetary Policy Committee (MPC) meeting. Last month’s minutes provided a strong hint that at least one of the Committee felt the case for further policy stimulus was building. Since then, MPC member Adam Posen has put down a clear marker that the Bank of England may need to do more to prevent the risk of the UK entering a Japanese-style deflation. We expect the policy vote to reveal a three-way split, with Andrew Sentance again likely to have been the lone dissenter in favour of higher rates, but Adam Posen, and possibly one or two others, expected to have broken ranks in favour of further stimulus. Just as important as the vote will be the tone of the policy debate. With leading indicators pointing to slower growth, and the fiscal squeeze set to begin in earnest, we believe the minutes will take the market a step further towards pricing in more QE over the coming months.


The second key event this week will be the HM Treasury’s Spending Review. Although the total ‘spending envelope’ was laid out in the June Budget, the Spending Review will provide detail on where the axe will fall over the next four years. With spending on the NHS and overseas aid ring-fenced, other departments face real spending reductions averaging around 20%. The key questions for the markets are whether the Chancellor delivers on his tough rhetoric, and whether the planned cuts are credible. If this is the case, sterling bond markets will welcome the news. Apart from the Spending Review and the MPC minutes, the UK data calendar is busy this week, with CBI industrial trends and retail sales figures due.


In the euro-zone, this week’s focus is on forward-looking business surveys. Preliminary October euro-zone manufacturing and services PMI data are published on Thursday, where we look for a slower pace of growth in both sectors, to readings of 53.2 and 53.6, respectively. German and French PMI data are also released. From a national perspective, particular attention will centre on October’s German Ifo business climate index, due on Friday. As yet, there is no suggestion of a slowdown in key German export markets (e.g. emerging Asia), although we note that the expectations component has deteriorated for the past two months. We look for a softening in the overall business climate index to 106.2 from 106.8 previously. The ZEW survey is also due this week, where our forecast on economic sentiment stands at -10 .


There is little in the way of significant US economic data this week. The key exception is September housing starts (Tuesday), where we look for an outturn of 590k units versus 598k previously. Jobless claims are published as usual on Thursday.


Consistent with monthly indicators, we expect Chinese GDP growth to have eased to 9.5% year-on-year in Q3, down from 10.3% in Q2. While the Q3 result is backward-looking, September’s industrial production and urban fixed investment data, also out this week, will provide insight as to the extent of the moderation in the economy leading into Q4. We look for both to be broadly unchanged from August at 14% and 25% respectively. Meanwhile, Chinese consumer prices are expected to have accelerated in September, increasing 3.6% year-on-year versus 3.5% in August – comfortably above the 3% annual target. Elsewhere, we expect the central banks of Brazil and Canada to keep their benchmark rates on hold this week. However, we do not believe that this is the beginning of an extended pause in either country’s tightening cycle.


Economic Research team




Lloyds TSB Corporate Markets Economic Research, 10 Gresham Street, London, EC2V 7AE, Switchboard: 0207 626 1500. Bloomberg: LLOY<GO>



This document, its contents and any related communication (altogether, the "Communication") does not constitute or form part of any offer to sell or an invitation to subscribe for, hold or purchase any securities or any other investment. This Communication shall not form the basis of or be relied on in connection with any contract or commitment whatsoever. This Communication is not intended to form, and should not form, the basis of any investment decision.

This Communication is not and should not be treated as investment research, a research recommendation, an opinion or advice. Recipients should conduct their own independent enquiries and obtain their own professional legal, regulatory, tax or accounting advice as appropriate. Any transaction which a recipient of this Communication may subsequently enter into may only be on the basis of such enquiries and advice, and that recipient's own knowledge and experience. This Communication has been prepared by, and is subject to the copyright of, Lloyds TSB Bank plc ("Lloyds TSB"). This Communication may not, in whole or in part, be reproduced, transmitted, stored in a retrieval system or translated in any other language in any form, by any means without the prior written consent of Lloyds. This Communication is provided for information purposes only, and is confidential and may not be referred to, disclosed, reproduced or redistributed, in whole or in part, to any other person. This Communication is based on current public information.

Whilst Lloyds TSB has exercised reasonable care in preparing this Communication, no representation or warranty, express or implied, is made as to the accuracy, reliability or completeness of the facts and date contained herein by Lloyds TSB, its group companies and its or their directors, officers, employees, associates and agents (altogether, "Lloyds TSB Persons"). The information contained in this Communication has not been independently verified by Lloyds TSB. The information and any opinions in this Communication are subject to change at any time and Lloyds is under no obligation to inform any person of any such change. This Communication may refer to future events which may or may not be within the control of Lloyds TSB Persons, and no representation or warranty, express or implied, is made as to whether or not such an event will occur. To the fullest extent permitted by applicable law, regulation and rule of regulatory body, Lloyds TSB Persons accept no responsibility for and shall have no liability for any loss in relation to this Communication, however arising (including in relation to any projections, analyses, assumptions and/ or opinions contained herein nor for any loss of profit or damages or any liability to a third party).  

Lloyds TSB Corporate Markets is a trading name of Lloyds TSB Bank plc and Lloyds TSB Scotland plc. Lloyds TSB Bank plc's registered office is at 25 Gresham Street, London EC2V 7HN and it is registered in England and Wales under no. 2065. Lloyds TSB Scotland plc's registered office is at Henry Duncan House, 120 George Street, Edinburgh EH2 4LH. Lloyds TSB Bank plc and Lloyds TSB Scotland plc are authorised and regulated by the Financial Services Authority.





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