User Name: Password:      Register - Lost password?

Forex News Blog
Back to The Headlines
Monday March 5, 2007 - 11:37:05 GMT
Lloyds TSB Financial Markets -

Share This Story:
| | Email

Economics Weekly: Why eurozone economic growth will be solid in 2007; Weekly economic data preview: ECB to raise rates to 3.75%, MPC has never moved in a Budget month

Economics Weekly:

Why eurozone economic growth will be solid in 2007

The recent sharp correction in global equity markets is a timely reminder that financial markets and economies do not move in a straight line. But a look at chart a for eurozone equity markets would suggest that it has been in a straight line recovery since the equity market crash of 2000 hit its floor in 2003. The current global equity market correction has barely impacted the EU - the reason appears to be that economic growth is robust by the standards of the last six years. The first 2 months of 2007 have shown a very positive start to the year for the eurozone economies, with investment strong and consumer spending holding up despite the VAT rise in Germany. We look at the factors driving eurozone economic growth, the prospects for this year and next and why this means that ECB interest rates are likely to rise by 0.25% this week to 3.75% and by a further 0.25% to 4% by June, supporting the euro in the near term.

Economic growth in the eurozone ended 2006 on a high, at 3%, above that of the US for the first time in four years, see chart b. The main drivers have been export growth, see chart c, which is up very sharply since 2005, particularly by German firms. Net trade (exports minus imports) is adding to eurozone economic growth. In turn, this has fed through to a rise in business investment spending, see chart d. But, as the chart also shows, consumer spending has also held up well in the eurozone, despite the prospect, and now the reality, of the VAT rise in Germany from January this year. Part of the reason is that unemployment continues to fall and employment to rise, see chart e. With economic growth in the US, emerging markets and UK set to be at trend or above, we look for eurozone exports to remain solid and so help to support investment spending, which we see as positive for the eurozone economy this year and next (chart d). The Purchasing Managers’ Surveys (PMI) for manufacturing and services, see chart f, are suggesting robust industrial activity in the months ahead, as are business and consumer sentiment, chart g.

Buoyant credit conditions, as exemplified by fast growth in money supply, see chart h, are likely supporting above trend economic activity. This means that the take up of credit by firms should be expanding and this is indeed the case, with a rise in borrowing by non-financial companies of 12.9% in the year to October 2006. Investment spending should rise by above 3% this year and next, boosting employment and leading to further falls in unemployment, from 8% last year to just over 7% in 2007. This fall in unemployment is one of the key reasons why we feel that consumer spending will remain solid in the eurozone, as well as buoyant credit conditions and faster earnings growth that are helping boost housing markets and creating positive wealth effects. The bond market yield curve, 10 year benchmark bond minus three month interbank offer rate, suggests that bond market participants view the outlook for eurozone growth as positive, see chart i. But with sustained faster economic growth has come higher inflation and hence higher interest rates as the European Central Bank (ECB) moves to keep price inflation in check as the output gap (actual output relative to potential) turns positive, leading to inflation pressure.

Chart j shows that the ECB is successful in its current tightening phase ( we see repo rates at 3.75% this week and 4% by June), as our forecast shows euro economic growth slowing in 2008 and the output gap narrowing, so that price inflation remains low and stable in 2008. This rise in ECB interest rates and a better economic performance should support the euro in the first half of this year, perhaps rising to US$1.35, but then it should fall back towards US$1.30 in the second half of 2007 as the prospects for US economic growth brighten.

Trevor Williams, Chief Economist

Weekly economic data preview

ECB to raise rates to 3.75%, MPC has never moved in a Budget month

• Bank rate could increase to 5.50% this week, but we believe that with the UK Budget due on 21st March - the Monetary Policy Committee (MPC) has never changed base rates in March during the last ten years - and given the slightly dovish undertone to the February MPC meeting minutes, the likelihood is that the next hike may be postponed to April, or more likely May.

• In contrast, we expect the ECB to raise interest rates to 3.75% on Thursday, reflecting the clear hint from ECB president Trichet at last month's press conference. Euro zone economic data have been strong in the first two months of 2007 and supportive of further monetary tightening. We look for interest rates to reach 4% by end-Q2, but they could then remain on hold for the rest of the year.

• Interest rate decisions in Australia, Canada and New Zealand this week are not expected to result in any changes, but accompanying statements may be important for assessing the outlook ahead. We believe recent equity market shifts reflect a correction rather than anything more serious.

• Key economic releases this week are dominated by the US, but services PMIs in the UK and EU- 13 will also be closely watched. If the UK services PMI, on Monday, bounced back above 60 in February, the BoE decision could be a lot tighter. The US payrolls report is released at the same time as the US trade balance on Friday, promising a nervy close to the week. We look for 120,000 new jobs to be added in February, with a continuing firm undertone to the other key aspects of the labour market report. However, the trade balance may have widened again slightly in January.

Recent UK data have re-ignited talk and speculation of another hike in Bank rate in the coming months. However, the chances of a hike this week appear reduced by the timing of the next UK Budget on 21st March. The MPC has never changed Bank rate in March in its 10 year history. The slightly dovish tone to the minutes of the February MPC meeting, despite two members voting for an immediate hike, also suggests some members of the committee feel that further confirmation from upcoming data is required before hiking rates again so soon. Recent data releases may not have been enough to change their minds. However, it is worth noting that the February BoE Inflation Report showed CPI inflation only returns to target in two years' time if Bank rate follows market rates which indicated a further hike to 5.50%. With growing signs that economic growth is likely to remain above its long-run trend pace in Q1 and January CPI inflation well above the 2% target, at 2.7%, the main uncertainty appears to be the path of wage growth. We forecast a rise to 5.50% in Bank rate by May, with an evens chance that it happens in April and 30% probability for March.

UK economic data this week could be significant to the BoE rate decision. The services PMI, on Monday, has a good correlation with changes in Bank rate and a reading above 60 in February would raise the possibility of a surprise on Thursday. The manufacturing PMI last week was well above market expectations and also highlighted escalating price pressures. Official industrial production data for January are published on Thursday. We look for a modest 0.2% rise, with manufacturing up by 0.3%, based on continuing solid EU economic growth and robust domestic demand.

ECB president Trichet gave a strong hint at the February interest rate press conference that rates would rise to 3.75% in March. By using the key phrase 'strongly vigilant' he effectively prepared listeners for a hike but was more reserved about the medium-term outlook. Euro zone data have been firm in the first two months of this year and support likely further monetary tightening ahead (see our main article). Looking at this week's data, services PMIs, on Monday, are expected to show activity remained buoyant in February, but higher taxes may have dented retail sales in January.

US data this week are unlikely to support the growing market view of rate cuts later this year. The stock market falls are a correction in what has been a strong upward trend and not a signal of imminent recession. Friday's NFP report may show a further 120,000 new jobs were added in February, but perhaps more significantly should confirm that both earnings growth and the unemployment rate remained far off the levels generally associated with interest rate cuts. The non-manufacturing ISM, on Monday, is forecast to show activity remained brisk in February, if at a slightly slower pace than in January. We look for an outturn near 58, down from 59 last month. The survey may elicit strong market reaction given its employment and prices sub-components. The US January trade deficit is out on Friday and may be overshadowed by a solid NFP report. US treasury secretary Paulson is in China later this week.
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

Tue 17 July 2018
AA 08:30 GB- Employment
A 13:15 US- Industrial Production
AA 14:00 US-Powell Testimony
Wed 18 July 2018
AA 08:30 GB- CPI
A 12:30 US- Housing Starts/Permits
AA 14:00 US-Powell Testimony
Thu 19 July 2018
AA 1:30 AU- Employment
AA 08:30 GB- Retail Sales
A 14:30 US- EIA Crude
A 12:30 US- Weekly Jobless
Fri 20 Jun 2018
A 12:30 CA- CPI/Retail Sales

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