User Name: Password:      Register - Lost password?

Forex News Blog
Back to The Headlines
Monday February 12, 2007 - 12:16:39 GMT
Lloyds TSB Financial Markets - www.lloydstsb.com/corporatemarkets

Share This Story:
| | Email

Economics Weekly: US housing market is on the road to recovery; Weekly economic data preview: Focus on UK Inflation Report & CPI and US Fed Bernanke testimony

Economics Weekly:

US housing market is on the road to recovery

US economy rebounding…

It is clear that US economic growth has returned to a 3% plus annual pace, somewhat above its long run sustainable, or trend rate, which we estimate as 2.75-3.0%. US money markets are no longer expecting the US central bank (the Federal Reserve) to cut short term interest rates in the first half of 2007, though the view further along the interest rate curve is still that the next move will be down. Our central view is that the next move in US interest rates could actually be up, on the basis that a US housing market recovery is already well under way and might remove the need for any rate cuts. Indeed, the pressure will be for a rise in US interest rates later in 2007 and early 2008, if the housing market does stage the kind of recovery we expect and begins to underpin consumer spending via greater confidence effects and renewed mortgage equity withdrawal.

…despite weakness in construction, the housing market is showing signs of recovery…
Concern about the potential weakness of US economic growth stems from the evidence shown in chart a. In all of the last six US recessions, the construction sector has been a good lead indicator of the wider economic downturn, but it has also sent one false signal (in 1966). Is it doing it again this time? We believe that the US housing market has turned, without the economy experiencing a recession. Mortgage applications and mortgage approvals are both now pointing sharply upward. Chart b shows this quite clearly. In addition, chart c shows that new and existing home sales are trending higher, based on three month moving averages that best pick up turning points. Chart d even shows that, at the national level (though by no means in all states), US house price inflation may have stopped falling and could be picking up. Are these indicators, though, simply reflecting a false dawn? That is possible, but would require in our view quite a sharp turn of sentiment and economic trends to lead to renewed housing market weakness.

…the explanation lies in a strong labour market and still relatively low interest rates…
What is going on? In our opinion, it is clear that the key to what is possibly a remarkable turnaround in the performance of the US housing market is continued growth in the wider economy, despite the sharp fall shown in construction activity. This is best illustrated by looking at consumer and business investment spending versus construction activity in annual growth terms, where the latter are rising strongly. What is maintaining consumer and business confidence? The answer is fourfold. One, US employment continues to grow and unemployment to fall, see chart e. Two, US company profits remains high and business confidence robust, see chart f. Another reason is that short and long term interest rates in the US, although higher than for some years, are still very low in terms of the last 20 years, see chart g. Finally, the US is running a fiscal deficit, supporting public spending. These factors are underpinning the recovery in the US housing market, and we think make the pick up currently underway a sustainable one.

…that are leading the whole economy to shrug off a recession in the construction sector for
the first time since the 1960s.

Our forecast shows that US economic growth will be around 2.9% p.a. this year, accelerating in 2008 to around 3.3% p.a. If so, see chart h, the US housing market will continue to recover and, we think, with a lag of some six to nine months, construction activity will also be picking up. If so, why would the US Fed be cutting interest rates at all this year or next? At best, any rate reduction is likely to be modest, but an equally modest rise first is also likely. Hence, US short term official interest rates may remain at current levels for some considerable time.
Trevor Williams, Chief 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.

Weekly economic data preview

Focus on UK Inflation Report & CPI and US Fed Bernanke testimony


• Why did the BoE leave interest rates unchanged last week? We expect next week's January CPI, made available at the MPC meeting, could have remained at 3% or below. Further, the Quarterly Inflation Report (QIR) could have projected CPI inflation to fall back to the 2% target in the medium term. As we discuss below, such a projection for CPI means that energy price inflation must fall more sharply than previously anticipated. However, the case for higher UK rates remains intact.

• A raft of US data are due next week, including the trade balance, retail sales, industrial production and housing starts/permits (see the Economics Weekly for a discussion about the US housing market). Fed Chairman Bernanke will also testify to Congress and will reveal new forecasts for GDP and inflation. We expect signs of stabilisation in the housing sector to continue and that the Fed will keep interest rates on hold in the coming months, but there is a risk of a bias to tighten emerging.

• The first estimates of Q4 GDP for the euro area and its main economies are expected to show a healthy pace of growth, with overall 2006 growth for the euro area forecast at 2.7% compared with 1.5% in 2005. As such, the ECB is expected to maintain its bias towards higher interest rates, with a quarter-point rise to 3.75% expected next month. The German ZEW survey is also due.

• In Japan, Q4 GDP and the deflator are due. We expect growth to rise 0.6%, following 0.2% in the prior quarter. However, the deflator is expected to remain in negative territory at 0.5%y/y. Therefore, we expect the BoJ to leave interest rates unchanged at 0.25% later this month.

Although the BoE decided not to surprise the markets by raising rates for the second time in as many months last week, the case for further policy tightening remains in place. The MPC had two crucial pieces of information at its disposable in last week's meeting which the markets did not: the January CPI and the Quarterly Inflation Report (QIR). We expect annual CPI to have fallen to 2.9% in January from 3%. Although we had previously expected a rise to 3.1% in January, which would have prompted Mervyn King to write a letter to the Chancellor, we cannot square this with the MPC's decision to leave rates on hold last week. On the other hand, the RPI measure is likely to have risen further to 4.5% from 4.4%, because of higher mortgage interest payments.

As for the BoE QIR, the no rate change last week seems to suggest that CPI is projected to fall towards the 2% target in the medium term, otherwise why would the MPC not have raised rates again? The problem with this is that it implies a much stronger fall in the projected CPI profile than in the November Report. Can this justified? Not entirely, in our view, but this is what the Report may show to give MPC more time to assess the impact of the recent rate rises. Although oil prices have fallen since the last QIR, the fall has not been sharp enough to justify a significantly sharper decline in CPI projections. Further, higher market interest rate assumptions compared with November cannot, in our view, justify such a steeper fall in the CPI projections, since growth has turned out to be stronger than the Bank expected. UK retail sales are also due and we see another solid monthly rise of 0.7%, based on positive anecdotal evidence.

In the US, there will be a deluge of data releases, while Fed Chairman Bernanke's semi-annual testimony to Congress, including new forecasts for growth and inflation, will be closely watched. The trade deficit is expected to widen to $60bn, while retail sales and industrial production are forecast to rise 0.3% and 0.2%, respectively. We expect core PPI to rise only 0.1%, but the Fed rate cut agenda should remain on the sidelines with further signs of stabilisation in the US housing sector. We expect housing starts to be 1630mln in January, slightly down from 1642mln, but consistent with the view that the sharp downturn since early 2006 has halted. Overall, we expect the Fed to keep interest rates unchanged at 5.25% for most of this year. The Fed may reduce rates by the year-end, though the risk is skewed towards steady rates until next year or even higher rates.

Eurozone data centre on preliminary Q4 GDP numbers and the German ZEW survey. We expect overall eurozone GDP to rise 0.5%, raising the annual rate to 2.9% from 2.7%. The German ZEW is also expected to rise to -1 inFebruary from -3.6, marking the third consecutive rise, as fears of the negative impact of the German VAT hike seemed to have been overdone. The ECB is expected to raise rates to 3.75% in March and we expect another rise to 4% in the second quarter.

 

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