User Name: Password:      Register - Lost password?

Forex News Blog
Back to The Headlines
Monday December 18, 2006 - 11:23:56 GMT
Lloyds TSB Financial Markets - www.lloydstsb.com/corporatemarkets

Share This Story:
| | Email

Economics Weekly:Will UK labour market tightness lead to higher inflation? - Weekly economic data preview

Economics Weekly:

Will UK labour market tightness lead to higher inflation?

In recent publications and comments, some members of the Bank of England’s Monetary Policy Committee (MPC) have voiced concern about the implications for price inflation from labour market strength. These concerns must now be even greater in view of the recent labour market data for November, which showed that employment rose and unemployment fell. We look at what this may mean for monetary policy in this week’s article, concluding that the risk of an interest rate rise in early 2007 has increased.

In the last few months, claimant count unemployment has turned from a fall to a rise. Recent data showed the biggest fall since January 2005, 5,700, keeping the rate of unemployment at 3% (chart a) and implying, if these falls were to be sustained that the rate of unemployment will fall further. In fact, when measured by the labour force survey, a more widely accepted international method, the unemployment rate fell from 5.6% to 5.5% in the three months to October. On this basis, the UK labour market has tightened in recent months. The reason is that economic growth is picking up speed and employment has risen as economic growth has accelerated (chart b). Moreover, growth in money supply, see chart c, is fast enough to justify continued above trend growth in UK gdp, and the possibility of further acceleration next year.

The figures for November also showed that pay inflation is beginning to pick up. Earning growth rose to 4.1% in the three months to October, from 3.9%. Excluding bonuses, the rise was from 3.5% in September to 3.8%. These rates are still low, but with the current fast pace of economic growth, price pressure is likely to intensify. In 2006, earnings growth was kept down by net migration and lower inactivity rates, see charts d & e, but this is unlikely to remain at the same intensity in the year ahead. Earnings growth is still below the critical 4.5% threshold (based on 2% productivity growth and 2% real earnings growth), but is now accelerating. More importantly, as the chart shows, price inflation picked up in November. Core price inflation is now 1.6%, well above the five year average of 1.25% (chart f). The link between price inflation and wage inflation suggests that earnings will now be under upward pressure (chart g). It is very difficult to see why, with price inflation at these levels, wage inflation will not rise and add to the difficulty of getting price inflation back below 2% (on our forecast it remains above target during 2007, see chart h). This means that monetary policy in 2007 is set to tighten. The question is whether or not interest rates only rise a further 0.25% or whether the MPC leaves it too late and interest rates end up rising towards 5.5% or above.

Trevor Williams, Chief Economist

Weekly economic data preview

Bank of England MPC minutes could reveal a split vote

• The minutes of the Bank of England December MPC meeting could show that some members already voted for another rate increase to 5.25%. Economic data due this week includes house prices, public finances, final Q3 gdp and the current account.

• Housing market data lead the economic release calendar this week in the US. Q3 current account data, final Q3 gdp and inflation data are also due. Fed FOMC member Lacker, who last week voted for higher US interest rates, will present his views on the economy.

• In the euro zone, Germany will publish its latest IFO survey of business sentiment. ECB president Trichet will testify to the European Parliament where he may comment on inflation and offer some clues on the trajectory of interest rates next year.

• The Bank of Japan meets on interest rates. The Bank is forecast to leave rates on hold at 0.25% despite a stronger Q4 Tankan business survey last Friday.

UK economic data will be overshadowed by the release on Wednesday of the minutes of the Bank of England December MPC meeting. A sequence of strong data since the start of the month has strengthened the argument for higher UK base rates next year, resulting in a rise in 5yr swaps above 5.30% last Friday for the first time since October. However, the data on inflation, unemployment and retail sales were only released last week and are unlikely to have featured in the debate on interest rates earlier this month. Nevertheless, the discussion could still provide some interesting insights about thinking on the MPC. The Bank's assessment of the balance of risks vis-a-vis inflation and the shift upwards in implicit market interest rate expectations (see chart below) could provoke some interesting comments from the monetary policy committee. Divisions between those advocating higher interest rates vs those pleading for no change surfaced in November and comments from various committee members in the interim from Andrew Sentance, Rachel Lomax, Paul Tucker and John Gieve suggest the minutes may again show a split vote. The latest RICS survey Tuesday is forecast to show further proof of a buoyant housing market, especially in the South East where property prices are currently rising at a faster rate than the country average. On this subject, we would not be surprised to read some comments in the MPC minutes on higher asset prices and the housing market in particular. Chancellor of the Exchequer Gordon Brown sounded optimistic two weeks ago on meeting his borrowing requirement for 2006/07 (even though he increased his borrowing estimate by £1.0bn to £36.8bn). We will keep an eye on the November public finances data on Wednesday to see if the Chancellor is still on target to meet his sums. The CBI distributive trades survey for December on Wednesday and may show a rebound from a disappointing November. The November survey was suspiciously out of line with upbeat ONS retail sales data last week. Having failed to capture stronger sales volumes last month, we expect the CBI survey to present a more promising outlook for December sales. Final Q3 gdp on Thursday is forecast to confirm the second estimate of 0.7% q/q and 2.7% y/y. Also on Thursday, figures are forecast to show that the Q3 current account deficit widened to £7.6bn from £7.0bn in Q2.

US economic data has recently surprised to the upside, forcing markets to reassess the outlook for interest rates next year. We will focus on the housing market data Tuesday for signs that the worst may be over and that the economy is experiencing a soft landing. Mortgage applications rose last week to the highest level since January, a sign that the housing market may indeed have bottomed. Monthly inflation data measured
by the core PCE index will be released on Friday and is forecast to show a rise in November to 2.5%.

The German December IFO survey will be published Tuesday and is forecast to have corrected some of the sharp gains in November. ECB president Trichet testifies to the European Parliament on Wednesday and is forecast to reiterate that upside inflation risks still exist.

The Bank of Japan is on Tuesday forecast to keep interest rates on hold at 0.25%.

Kenneth Broux, Economist

www.lloydstsbfinancialmarkets.com
Lloyds TSB Bank,
Financial Markets
Division,
Faryners House,
25 Monument,
London EC3R 8BQ
Switchboard:
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."



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