User Name: Password:      Register - Lost password?

Forex News Blog
Back to The Headlines
Monday July 11, 2005 - 10:56:43 GMT
Lloyds TSB Financial Markets -

Share This Story:
| | Email

London Terror Attacks – economic impact likely to be small

Economics Weekly: Economic Research and Analysis

London Terror Attacks – economic impact likely to be small

London hit by terror attacks
The London terror attacks have clearly come as a shock (even though they may not have been a surprise) and one question amongst many is: what economic impact are they likely to have? There are a number of channels through which they could impact the economy. These range from financial markets, consumer and business confidence and the real economy, although all are interrelated. Economic fears were quickly reflected in the financial markets, with equity markets off sharply, bond prices up and interest futures pricing more aggressively for a rate cut from the Bank of England as gold prices also rose. But are there also likely to be effects on the ‘real economy’ - consumer spending, investment spending and so on?

Financial market impact
First of all, the initial financial markets responses were predictable: equities fell; bond prices rose (yields fell), the currency fell and interest rate markets were looking for a quick base rate cut from the Bank of England. By the end of the day, however, some of these losses were already unwinding. The Bank of England kept interest rates at 4.75% at its July Monetary Policy Committee (MPC) meeting, equity markets were rebounding, and gilts were shedding some of their gains.

At close of play today (Friday, 8th), the equity markets had regained all of their losses and the FTSE 100 was above its level before the news of the attacks broke. But gilts yields are still about 7 basis points below the level before the news, currently at 4.21% on the ten year benchmark. The UK currency was still down, but by less than 1 cent against the US dollar. The short term interest futures market was still marginally tilted toward a cut in base rates being more likely now than prior to the bomb attacks. But, overall, it appears that the UK financial markets seem to have calculated that the effects of the attacks on London are likely to be relatively limited in economic scope. Are they likely to be proved right?

Whole economy impact
Chart A shows that at the level of the whole economy the effects of the terror attacks in the US and Madrid, though clearly on a different scale to those in London (particularly the attacks in the US), seem to have had little discernible negative effect on the path of the US or Spanish economies. Of course, it is difficult to say what course they would have taken in the absence of the attacks, but in the quarter after the bombings, economic growth in each country was growing strongly, see chart A. In the case of Spain, growth remained robust during and after the bombing. In the case of the US, the economy actually moved from recession to growth, as fiscal and monetary policy was loosened. Since the attacks in London are smaller in scope and caused much less physical damage than previous attacks on the City of London by the IRA or the attacks in the US and Spain, it is likely that, at least at the level of the overall economy, the impact on the UK is also likely to be small. But will the bomb attacks have bigger effects at a sector level and hit confidence?

Impact at industry level
The first effect might be on consumer and business confidence, but it is difficult to say much more at this stage. If confidence does get badly affected, then the Bank of England does have plenty of scope to cut interest rates. Although interest rates were kept at 4.75% at the July MPC meeting, a rate cut in August is widely expected - though it was expected before the bombings due to significant downward revisions to economic growth in Q1 2005 and, to a lesser extent, slowing retail sales. In terms of the impact on specific sectors, the main effect is likely to be felt in the construction and tourism industries. There will have to be work done on the parts of the tube network that were affected, for instance. But this is likely to be small in spending terms relative to the size of the London economy.

There is also potential for an impact on retail sectors if consumer confidence is badly hit, especially as retail spending has been slowing recently. This may depend crucially on whether there are other attacks. But if it is the same terror group that was responsible for the attacks in the US and Spain, then it does not appear to wage a sustained campaign in one country. The City of London is not a retail centre, so people do not generally visit it just to shop. Hence, the direct retail impact may also be small, so long as other areas are not targeted. Tourism seems the industry most likely to be negatively affected, with visitors to the UK and to London both from other parts of the country and from overseas significantly reduced. London gets about a fifth of all the overseas visits to the UK, but some 50% of their spending, according to OEF research. But set against the £1,200bn economy of the UK, any impact is likely to be much less than 0.1% of gdp. And as chart A shows, if the attacks lead to an increase in government spending and cuts in interest rates, then the economy might even grow more quickly as determination spreads not be seen to give in to terrorist acts. In terms of policy, however, it does make it more likely that there will be a ¼% cut in base rates at the August MPC meeting. However, further cuts after that will not be automatic in our view, but entirely dependent on how the economy performs in the second half of the year as the MPC holds back to assess the effects of higher oil prices and a weaker currency on price inflation.

UK economic indicators
UK data this week will be eagerly awaited to see what impact high oil prices are having on imported price inflation; whether firms can continue to absorb the oil price increase in their profit margins or whether producer output price inflation is accelerating as they pass some of it on to customers. Certainly, we look for price data on Monday to show both an increase in firms’ input prices and their output prices. Higher oil prices may also lead to widening of the UK’s trade deficit, also due on Monday. Tuesday may show that consumer price inflation has moved above a 2% annual rate in June, after staying at 1.9% for three months. This is something that the Bank of England has warned this year about but the fact of the rise might induce some caution in financial markets about expecting the MPC to cut short term interest rates three times in the next twelve months, as they are just about expecting. Our view is more cautious, that a cut in August is likely, mainly due to data revisions and even if inflation moves modestly above target, but the MPC will try and keep rates on hold after that. Labour market data on Wednesday should show that wage inflation remains just within sight of the MPC tolerance level of 4.5% a year, and that economic growth is still sufficient to be leading to gains in employment.
Trevor Williams, Chief Economist
[email protected]
Lloyds TSB Bank,
Financial Markets
Faryners House,
25 Monument,
London EC3R 8BQ
0207 283 - 1000

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