User Name: Password:      Register - Lost password?

Forex News Blog
Back to The Headlines
Monday November 19, 2007 - 11:56:40 GMT
Lloyds TSB Financial Markets -

Share This Story:
| | Email

Economics Weekly: Slower growth to lead to UK rate cuts; Weekly economic data preview: BoE and US Fed publish minutes of their last interest rate setting meetings

Economics Weekly 19 November 2007

Slower growth to lead to UK rate cuts

Interest rate sentiment has shifted in the UK in the past month following the release of November’s Quarterly Inflation Report (QIR) from the Bank of England. It was made very clear in the report that the next move in UK official short term interest rates is downwards. This in spite of 3.3% annual growth in Q3 2007 and the first rise in annual price inflation sinceMarch, which took the rate to 2.1% for October and just above the 2% target from the 1.8% rate recorded in August and September. Of course, the QIR to some extent validated a view amongst the financial markets that the next move in UK rates was down, but the report finally removed the doubts held by some.

Many argue that why should the Bank of England wait, why not just cut interest rates straight away?
One MPC member, David Blanchflower, has clearly taken this approach and voted for a 0.25% rate cut at the November meeting, where the decision was 8:1 to leave Bank rate at 5.75%. A tightening of credit standards, lower retail sales and slower growth in house prices are cited as evidence in favour of immediate rate cuts. But in the briefing that accompanied the QIR, the Governor, Mervyn King, reiterated that there were still worries about the elevated ability of companies to pass on increases in their costs to customers, high expectations held by UK households about inflation trends and higher oil and commodity prices as factors that should lead the MPC to wait for further evidence before acting. Indeed, the Governor said that the timing of the rate cut was ‘data dependent’. In particular, on the actuality of the economy slowing down from its recent fast pace.

What the latest Inflation Report said
The report highlighted that the risks to growth are to the downside, while those to inflation are more balanced. However, it is worth noting that the profile for inflation in the November report is higher for 2008 than in the August report and the committee consider the uncertainties surrounding the medium-term outlook as higher than in August as well. Reflecting this uncertainty, we believe the Bank of England will continue to proceed cautiously and look for clearer signs of slower economic growth and stable inflation before deciding to cut interest rates.

Inflation to ease to target, economic growth to slow
The latest BoE forecasts show that UK economic growth slows quite sharply next year, assuming Bank rate follows market expectations, troughing at around 2% in Q2 2008, although then recovering towards 3% at the end of the two-year horizon in 2009. The slowdown is based on the impact of the previous hikes in Bank rate, tighter credit conditions and heightened uncertainty, while the recovery is supported by lower interest rates and weaker sterling. Both the pace of the slowdown and extent of the consequent rebound in growth are slightly sharper than that predicted in the August Inflation Report. Our forecasts show a similar profile, with UK growth slowing to 2.3% in 2008, from around 3.2% this year, before picking up to 2.8% in 2009.

So what sort of economic data will the MPC be looking at before deciding to cut rates?
We have put together a series of charts that look at a range of UK economic indicators in relation to the last interest rate cycle and the current one to judge the pace of the adjustment of some key economic variables to higher interest rates since August of last year. Some of the data support the argument for a rate cut; others support the argument for a hold. On balance, our take on the figures is that interest rates will not be cut at the December MPC meeting but at the meeting in February 2008, though an earlier move cannot be entirely ruled out.

Rate rises since August slowing economy
It is increasingly becoming clear that the 125 basis point of tightening since August last year is finally taking effect, but the impact is not yet clear cut. Chart a shows that manufacturing output growth is falling and is in line with the slowdown that occurred in the last interest rate tightening phase of 2003-2005. House price inflation is finally slowing sharply, chart b, with the path it is taking bang in line with the last rate cycle, some 15 months after the initial rate rise. Retail sales growth is now weakening, and was down by 0.1% in November. However, this still leaves the annual rate a little stronger than in the last rate cycle, see chart c. Other evidence is that PMI surveys are lower, both for services and manufacturing; the CBI reported that order books were sharply lower in October and the British Retail Sales Consortium (BRC) reported sales are down, with Gfk consumer confidence also showing some fall back.

But as chart d shows, inflation rose in October, and though down on the year is high. Unemployment fell further in October, by 9,900, but tracks the experience of the 2003-2005 phase, see chart e. Worryingly, chart f shows average earnings growth picking up, but it is still very low and below the experience of the previous monetary tightening cycle. Despite a squeeze on incomes, mortgage lending is still strong, see chart g. However, chart h shows that mortgage approvals are now falling and this will reduce the value of mortgage loans in the months ahead. Moreover, chart i is indicating that consumer credit has also weakened sharply; though up off its lows in October. But money supply growth, chart j, remains stubbornly strong. This will cause the MPC to pause as it implies strong asset price inflation.

In summary, we believe that there remains enough to worry the MPC for it to leave rates at 5.75% in December, but a cut in February is odds on. Further cuts in 2008 are likely, possibly down to 5% by the end of the year, if the economy slows and leads wage inflation to fall anew.

Trevor Williams, Chief Economist

Weekly economic data preview

BoE and US Fed publish minutes of their last interest rate setting meetings

The US market is closed for Thanksgiving on Thursday/ Friday and this week is generally far quieter for economic data. But minutes of the US Fed and the BoE meetings on 7/8 November and 31st October, respectively, feature, which are expected to highlight the content of discussions on appropriate levels of interest rates. Markets are now poised for a series of interest rate cuts by the Bank of England, so this week's data will be closely watched for signs of economic slowdown necessary to justify cuts in interest rates. US housing market data may continue to point to further weakness, fuelling the debate over whether or not the Fed will cut rates further this year. Fears that the strong euro and the credit crisis is hitting the eurozone economies may be dashed as flash EU-13 manufacturing and services PMIs for November may show the economy growing above the key level of 50, indicating expansion and leaving the door open for higher interest rates early next year.

• On Wednesday, the minutes of the last MPC meeting are likely to show an 8-1 voting pattern in favour of keeping rates unchanged at 5.75%. The leading dove, David Blanchflower, may well have again been the only dissenter, voting to cut rates immediately, rather than waiting until the economy shows clearer signs of slowdown. Analysts will glean the content of the discussion for any other indication that members are more seriously concerned about growth or, indeed, are opposed to cuts.

• Preliminary UK monetary data for October is published on Monday and should confirm that M4 money supply growth is accelerating, rising 13.1% annually, compared with 12.8% in September. M4 sterling lending may weaken for the second consecutive month to a rise of £21bn in from £23.7bn in September and £26-27bn a month in July/ August, as borrowers tighten their belts and shore up flagging savings. Building Society mortgage approvals are also published giving an early indication of the health of the wider housing market in October. Public finance data may show the PSNCR at -£7bn, lowering the cumulative deficit to £6.2bn from $13.2bn in September. The CBI industrial trends survey may fall to -8 in November from -6 in October, the weakest outcome since January, perhaps due to sterling's strength. The details of the survey will highlight export performance as well as future expectations for output and prices. On Friday, UK Q3 gdp is likely to be confirmed at 0.8% on the quarter and 3.3% on the year.

• The current situation in the US construction industry and housing market will fix attention on Tuesday. Housing starts may decline to 1.18m in October from 1.19m in September, while building permits may fall to 1.21m from 1.26m in September. Also, at 19:00 the Fed publishes minutes of the last FOMC meeting, which should confirm the view that upside risks to inflation are now balanced by downside risks to growth. A fairly high number of initial jobless claims may be published again on Wednesday, suggesting that this month's NFP jobs number may be below last month's level of 166,000. Also Wednesday, University of Michigan consumer confidence may be confirmed around the 75 level, the lowest since October 2005.

• Market participants may be on the lookout for signs of strength in European data, thus supporting the case for higher interest rates. EU-13 industrial orders in September may strengthen despite exporters' concern over the strong euro. The key data this week is published on Friday - flash November PMIs for manufacturing and services. Manufacturing confidence may rise to a balance of 55.5 from 51.5 in October. Service firms' confidence could fall a touch to 55.5 from 55.8 in October.

• In the wake of last week's disappointing manufacturing release, Canada's consumer price and retail sales data on Tuesday and Wednesday, respectively, will attract interest. The figures are expected to be strong, supporting calls for higher rates.

Nichola James, Senior Economist

Economic Research,
Lloyds TSB Corporate
10 Gresham Street,
London EC2V 7AE
0207 626 - 1500

<i>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.</i>



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

Mon 10 Sep 2018
AA 08:30 GB- GDP, Trade, Output
Tue 11 Sep 2018
AA 08:30 GB- Employment Decision
A 09:00 DE- ZEW Survey
Wed 12 Sep 2018
A 12:30 US- PPI
A 14:30 US- EIA Crude
A 18:00 US- Beige Book
Thu 13 Sep 2018
A 1:30 AU- Employment
AA 11:00 GB- Bank of England Decision
AA 11:45 EZ- European Central Bank Decision
A 12:30 US- Weekly Jobless
AA 12:30 US- CPI
Fri 14 Sep 2018
A 08:30 GB- GDP
AA 12:30 US- Retail Sales
A 13:15 US- Industrial Production
AA 14:00 US- prelim University of Michigan

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