User Name: Password:      Register - Lost password?

Forex News Blog
Back to The Headlines
Friday December 22, 2006 - 16:10:43 GMT
Lloyds TSB Financial Markets - www.lloydstsb.com/corporatemarkets

Share This Story:
| | Email

Economics Weekly: Global growth exceeded expectations in 2006, Will US growth outpace the euro zone and UK again in 2007?

Economics Weekly:

Global growth exceeded expectations in 2006

The prospects for the global economy in 2007 are partly dependent on how it performed this year. In this article, we look back at how the global, UK, US, EU and Japan economies performed in 2006 compared with consensus expectations for the year. Our conclusion? In terms of growth, there was outperformance, despite higher oil prices and higher short term interest rates. But there was also a lot of exchange rate volatility (see table 1) and consumer price inflation was also higher than expected. Despite this, bond yields remained low as expected, and equity markets boomed. The main reason? Buoyant liquidity, with large current account surpluses in Asia and in the oil exporting countries, combining with continued growth in the developed economies to generate rapid growth in money supply around the world. So strong equity markets meant that wealth effects encouraged consumer spending (offsetting the negative effect from high fuels prices) at the same time cheap finance meant that company investment spending picked up sharply.

Chart a shows that global economic growth was better than expected in 2006, at 3.8% in December this year against 3.2% in 2005 (comparing forecasts made in December 2005 for 2006 with the latest estimate for the year made in December 2006), but inflation was also higher than predicted, though with less of a gap compared with growth. This was despite the fact that in December 2005 the expectation was that the oil price (Brent crude) would end 2006 at $56 a barrel; instead it is currently at $63 and has averaged $66 so far in this year. This pattern of faster growth was repeated for all of the major economies, see chart b, except the US, where growth was only 0.1% less than expected.

With faster than expected global economic growth, it was no surprise that global price inflation was also higher than expected, though not by as much as the difference between expected growth and actual growth, see chart a. With regards to inflation in the UK, US, EU and Japan, it was also higher than expected, except in Japan where it was bang in line with predictions, see chart c.

With faster than expected growth and higher than expected inflation, it should come as no surprise to see that short term interest rates (3 month rates) in all the major economies are currently above expected end year rates. And moreover, the differences are quite large - 5% short term rates in the US, against expectations of 4.7%, 5.3% in the UK, against a view of 4.3% and 3.7% in the EU, against the 2.7% predicted. With this kind of increase in interest rates relative to expectations, why was economic growth not weaker? The short explanation is shown in chart e. Long term interest rates are pretty much as expected overall (lower in the US, though a touch higher in the UK and EU and Japan), despite faster economic and higher inflation.

So global liquidity remained very buoyant, as shown by fast growth in money supply and buoyant equity markets, see chart f. But what does this mean for 2007? We think the global economy is starting 2007 in a good position, with growth accelerating in a number of countries and, with oil prices lower than the average for 2006, economic activity should get a boost and price inflation may be pushed lower. US growth will slow but not as much as expected. Fast growth in the UK and EU will lead to further interest rate rises. And in Japan, continued recovery will lead to monetary policy returning closer to normal.

Trevor Williams, Chief Economist

Will US growth outpace the euro zone and UK again in 2007?
• After recent weakness, it is fashionable to look for a further fall in the dollar in 2007, but it could actually rally. US short-term interest rates may remain on hold in Q1, with the chances of a cut evenly balanced with that of a rise. The latest housing market data and consumer confidence and non-farm payrolls figures for December head up a relatively busy period for US economic data over the coming fortnight.

• Although the Bank of England MPC voted unanimously to keep interest rates at 5% in December, recent strong data suggest UK interest rates will rise early in Q1 2007 and we look for bank rate to rise to 5.25% in February. A strong housing market and fast growth in money supply may have helped net mortgage lending scale a near-record £10bn in November.

• Recent economic data from the euro zone suggest the rise in the German VAT rate from January may only have a limited impact on economic growth in 2007. However, the ECB may wait for some early confirmation before pressing ahead with further tightening. We see interest rates at 3.75% by Q1 2007. The 'flash' December CPI estimate should show inflation remains on an upward trend.

• The Bank of Japan is likely to remain very cautious about raising interest rates in 2007. Economic growth will slow slightly from this year's pace but remain healthy. However, inflation should remain subdued. We look for interest rates to rise only modestly from current levels, maintaining downward pressure on the yen.


In the UK, one of the biggest surprises of 2006 has been the renewed strength seen in housing market activity. Annual house price inflation has accelerated again recently and will probably exceed 10% on most measures in the coming months, despite two 0.25% hikes in interest rates. The BBA reported last week that lending for home purchase rose to a record £6.5bn in November, up from £5.6bn in October. The Bank of England figures may show overall net mortgage lending neared a record £10bn, when they are published on Friday. Mortgage approvals rose to 128,000 in October, the highest since December 2003, and are likely to have remained robust in November. This is clearly positive for housing market activity and price growth over the next six months and, if sustained, could see house price inflation again beat most forecasts for 2007. We believe that the strength of housing market activity also presents an upside risk for UK economic growth, which we forecast is likely to accelerate slightly to 2.8% in 2007, from 2.6% this year. This view should be supported by another set of strong PMI data for manufacturing and services output in December next week. The minutes of the December MPC meeting showed that while the decision to keep bank rate at 5% was unanimous, there were concerns about the near-term outlook for wages, rising inflation expectations, robust money and credit growth and faster than anticipated house price inflation. Data since the meeting have been particularly strong and are likely to lead to at least discussion of the merits of a further rate rise in January and we attach a slim possibility to the chances of a surprise hike. However, with the next BoE Inflation Report due in February, we believe this is the most likely month for the first rise in bank rate in 2007, to 5.25%, with a growing risk that this may not prove to be the last.

The chart below shows the consensus estimate for US economic growth in 2007 is sharply below this year's likely outturn of around 3.4%. This, and the related outlook for short-term interest rates, have been two of the key factors cited as being behind the recent sharp fall in the dollar. However, we believe that US economic growth could prove more resilient than most forecasters expect and look for the dollar to benefit from this in 2007. There are some key US economic data due over the next two weeks. This week, the outlook for the housing market will be in focus, with financial markets awaiting November data for new and existing home sales. A modest easing in both is expected. However, December consumer confidence, on Thursday, we think may show a small improvement. Looking ahead, the December labour market report, on 5 January, looms large and the minutes of the December FOMC meeting (2 January) will also attract significant market attention.

Key economic data from the euro zone are limited over the holiday period, but will be closely watched. M3 Money supply growth, on Friday, may have accelerated to 8.7% in November. The 'flash' CPI estimate, due 4 January, may show annual inflation rose to 1.9% in December. The data should add support to the view that euro zone interest rates remain on an upward trajectory in 2007.

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 16 October 2017

Register for the Amazing Trader

1.

Amazing Trader EVENT RISK Calendar:

Mon 16 Oct
01:30 CN- CPI
21:45 NZ- CPI
Tue 17 Oct
08:30 GB- CPI
09:00 DE- ZEW Survey
09:00 EZ- Final HICP
Wed 18 Oct
12:30 US- Housing Starts & Permits
14:30 US- EIA Crude
Thu 19 Oct
01:30 AU- Employment
08:30 GB- Retail Sales
12:30 US- Weekly Jobless
Fri 20 Oct
12:30 CA- Retail Sales & CPI
14:00 US- Existing Homes Sales

Forex Trading Outlook


Trading Opportunities


  • POTENTIAL PRICE RISK: HIGH Tue-- 08:30 GMT GB- CPI top tier confirmation of Inflation.

  • POTENTIAL PRICE RISK: Medium Tue-- 09:00 GMT DE- ZEW Survey second most important German monthly Survey.

  • POTENTIAL PRICE RISK: Medium Tue-- 09:00 GMT EZ- final HICP revision to flash report. Revisions are usually minor.

  • POTENTIAL PRICE RISK: Medium Tue-- 13:15 GMT US- Industrial Production. Top output indicator.



  • POTENTIAL PRICE RISK: Medium Wed-- 12:30 GMT US- Housing Starts and Permits revision to flash report. Useful housing leading indicator.

  • POTENTIAL PRICE RISK: Medium Wed-- 14:30 GMT US- EIA Crude. Top WTI inventory measure.



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