Share This Story
ECONOMIC DATA ANALYSIS - MPC MEETS AGAINST UNCERTAIN GLOBAL BACKGROUND
ANALYSIS FRIDAY 5 OCTOBER 2014
MEETS AGAINST UNCERTAIN GLOBAL BACKGROUND
- MPC meets amid signs of fading
- German and UK
industrial production forecast to have contracted in August
- FOMC minutes
watched for hints on forward guidance
It has been a choppy week for markets. Amid rising tensions in
Hong Kong, perceptions of geopolitical risk have re-emerged. This, coupled with
concerns over debt levels in China and mixed economic data, has prompted a fall
in equity markets and a further scaling back of rate rise expectations across
Europe. 10-yr gilt yields ended the week around 7bp lower, at 2.40%, with the
market pushing out the timing of the first rise in UK interest rates to late
spring next year. In the FX market, the US dollar remained the notable
outperformer. Following today’s strong US employment report, GBP/USD
broke below 1.60 and EUR/USD hit a new 2-year low close to 1.25.
On the data front, GDP revisions
confirmed that the UK economy had enjoyed a shallower recession and stronger
recovery since 2008, but this was overshadowed by i) accompanying revisions
that showed a yawning current account deficit and ii) some weakening in the
latest PMIs. Over the coming week, we expect to see signs of a softening in the
hard data. August manufacturing output (Tues) is forecast to contract by
0.1%m/m, while the export numbers in the August visible trade data (Fri) are
likely to underscore the challenge of external rebalancing (see back page for
more details). The MPC also reconvenes for its policy meeting (Thurs). No
change is expected, with the minutes published in two weeks’ time. The
September BRC shop prices (Weds) and RICS house price reports are also due.
Both should provide a crosscheck on the extent to which the housing
market is cooling and discounting is affecting inflation.
Elsewhere, the latest euro zone inflation outturn
and generally weaker-than-expected PMIs across the region underscored the
challenges facing the ECB. Although the core rate was unchanged, the headline
rate of inflation dropped to a five-year low of just 0.3% in September. Still,
no new stimulus measures were announced by the ECB at its latest meeting and
details of its ABS and covered bond purchases appeared to fall short of what
the markets had hoped for.
In the coming week, August industrial production
are also due across the euro area. The general tone of these data is likely to
be weak. The drop in the manufacturing PMI, coupled with a weak IFO
outturn underscores the downside risk in Germany. The focus will also be
on any sign of unease amongst policy officials regarding the fall in the
euro, with ECB President Draghi recently suggesting that the drop is starting
to cause concern in some quarters. G20 financial ministers and central bank
governors meet from midweek ahead of the IMF gathering at the weekend.
In the US, the strength of the September employment
report helped reinforce confidence in the economic recovery.
An upward revision to August and a 248k payrolls rise in September pointed to a
strengthening economy, alongside continued falls in labour participation. There
are few data releases in the coming week apart from August wholesale
inventories (Thurs) and the JOLTS survey of turnover in the labour market (one
of Fed Chair Yellen’s favourite indicators). Instead, most attention will be on
the minutes of the September FOMC meeting (Wed).
Minutes of meetings that are
followed by press conferences by the Fed Chair usually contain few surprises
but there are enough uncertainties this time to make them a potential market
mover. Any comments about its forward guidance policy will attract interest -
particularly with regard to the potential timing of any change and the possible
alternatives. The September payroll rise has increased the chances of a
change to the Fed’s statement after its late October meeting. However, the
December meeting, which again will be followed by a press conference at which
Fed Chair Yellen can explain the reasoning behind any move, still seems a more
likely date. There are also several Fed speakers over the coming week.
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.
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 ank plc (“Lloyds TSB”) and
Bank of Scotland plc ("Bank of Scotland") have exercised reasonable
care in preparing this material and any views or information expressed or
presented are based on sources it believes to be accurate and reliable, no
representation or warranty, express or implied, is made as to the accuracy,
reliability or completeness of the facts and data contained herein.
This material has
been prepared for information purposes only and Lloyds TSB, Bank of Scotland,
their directors, officers and employees are not responsible for any
consequences arising from any reliance upon such information. Under no
circumstances should this material be treated as an offer or solicitation to
offer, to buy or sell any product or enter into any transaction. If you receive
information from us which is inconsistent with other information which you have
received from us, you should refer this to your Lloyds TSB or Bank of Scotland
Relationship Manager for clarification.
Lloyds Bank Corporate
Markets, Lloyds TSB Corporate Markets and Lloyds TSB are trading names of
Lloyds TSB Bank plc, Lloyds TSB Scotland plc and Bank of Scotland plc. Lloyds
TSB Bank plc. Registered Office: 25
Gresham Street, London EC2V 7HN. Registered in England and Wales no. 2065.
Lloyds TSB Scotland plc. Registered Office: Henry Duncan House, 120 George Street, Edinburgh EH2 4LH.
Registered in Scotland
no. 95237. Bank of Scotland plc. Registered Office: The Mound, Edinburgh EH1 1YZ. Registered in Scotland no.
SC32700. Authorised and regulated by the Financial Services Authority under
registration numbers 119278, 191240 and 169628 respectively.
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."