Monday November 1, 2010 - 10:24:31 GMT
Share This Story
Lloyds TSB Financial Markets - www.lloydstsb.com/corporatemarkets
Economics Weekly - Markets poised for action from the Fed...
Economics Weekly - 1 November 2010
Markets poised for action from the Fed...
The week will be dominated by the Mid-term elections and the FOMC meeting on Wednesday. Markets are expecting the Fed to announce upwards of $750bn of additional QE. Failure to do so will lead to unfavourable market shifts. Additionally, QE may not do a huge amount to help the economy in our view; as savers want to save and interest rates are already at rock bottom. But it should help to improve sentiment in the markets and keep down long term rates. Watch out for any changes in the Fedâ€™s language around inflation and whether it thinks it has now done enough and how any QE will be implemented this time round. Data this week will focus on Fridayâ€™s employment numbers, where we look for a rise of nearly 90k in October, as the census-worker driven decline wears off. Meanwhile, the ISM surveys should hold up with price pressures remaining low.
This weekâ€™s UK highlight is Thursdayâ€™s Bank of Englandâ€™s policy decision, when it is widely expected that both Bank Rate and the size of the QE programme will remain unchanged. As in October, however, it is likely that opinions on the MPC remain polarised with Andrew Sentance and Adam Posen again poised to vote in entirely different directions. The policy decision will be consistent with the latest Inflation Report forecasts (due on 11 November) and if the Bankâ€™s outlook for growth has worsened significantly relative to August, the outcome may yet surprise. Our own view is that the BoE will ultimately expand the size of its asset purchase programme, but not before growth shows clearer signs of losing momentum - which may take several months. PMI surveys will provide some guidance on this. October data are set for release early this week and we look for a continuing picture of weaker growth, albeit with manufacturing still outperforming the services sector.
In the euro-zone, as in other major economic regions, the focus this week will be on the latest central bank policy meeting. We look for the ECB to keep its main refinancing rate on hold at 1%. An uneventful press conference seems in prospect although questions about an eventual â€˜exit strategyâ€™ seem likely with 3-month Euribor now having risen above 1%. In practice, while the ECB will have an eye on a reversal from its current accommodative policy stance, the generous liquidity facilities still in place for banks are a reminder of the fragility associated with the euro-zone economic recovery. Indeed, Mr. Trichet could make reference to a prospective weaker pace of activity in Q3 compared with the healthy 1% quarter-on-quarter pace seen in Q2. Preliminary Q3 GDP figures for the euro
area are released on 12 November. Elsewhere in the euro-zone, this week sees the release of final euro-zone PMI data for both the manufacturing and services sectors (see calendar).
Following last weekâ€™s tepid Q3 inflation data in Australia, we now expect the RBA to keep its cash policy rate unchanged at 4.5% at Tuesdayâ€™s meeting. Nonetheless, the arguments still hold for a 25bp hike and we have pushed our forecast for an interest rate hike from November to December, when the RBA will be in possession of the latest wage data. Meanwhile, Indonesiaâ€™s central bank is expected to keep its interest rate unchanged at 6.5%. But we look for the Reserve Bank of India to raise both its repo and reverse repo rate by 25bp this week, to 5.25% and 6.25%, respectively.
Lloyds TSB Corporate Markets Economic Research, 10 Gresham Street, London, EC2V 7AE, Switchboard: 0207 626 1500. www.lloydstsbcorporatemarkets.com 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
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
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."