Tag Archives: U.K. economy

Will The Bank Of England Inflation Report Move Sterling?

Here’s today’s ‘Just A Minute’ bringing you a 60 second summary of what’s happening in the financial markets:

Main Trading Event Of The Day: U.K. BOE Inflation Report @ 09.30 & U.S. PPI @ 12.30 GMT

WHAT WE’RE WATCHING TODAY

Will The Bank Of England Inflation Report Move Sterling?

The GBP has had a favourable performance over the past year, but with the Bank of England’s inflation report due today, this could be set to change. Investors will be listening to BoE Governor Mark Carney closely for any indications of an interest rate hike this year against a backdrop of a strengthening British economy. Traders will be focusing on the British pound as the Bank of England’s Quarterly Inflation Report is one of the most important event risks this week. The big question is whether the economic landscape has changed enough for the central bank to take a more active approach to monetary policy.

After years of sluggish growth following the 2008 financial crisis, the U.K. economy has finally landed on its feet and is set to clock up a healthy 3 percent growth rate this year. However, house prices remain a concern, with a 10 percent surge over the past year raising fears of a bubble. As the economy recovers, many industry watchers have speculated that the central bank could raise interest rates from all-time lows of 0.5 percent in a bid to offset inflation. Retail sales growth also remains weak while consumer price growth slowed to 1.6 percent in March from 1.7 percent in February, dampening rate hike expectations.

Nevertheless, analysts remained convinced that the BoE inflation report could give the pound a boost and that it is due a little bounce having lost some ground recently. Major policy changes are not expected to come out of the BoE’s inflation report, with Carney likely to retain an optimistic outlook on the U.K. recovery while acknowledging spare capacity in the economy.

U.S. Retail Sales Slow, But Economic Growth On Track to Accelerate

U.S. retail sales slowed down in April after strong gains in the previous two months but the news appears to have done little to change views that the economy was poised for faster growth this quarter. Retail sales edged up 0.1 percent last month, held back by declines in some sectors including furniture and electronics, possibly due to consumers being more cautious in their spending habits as they await confirmation that the economy is, in fact, poised to accelerate. Retail sales, which account for a third of consumer spending, rose 1.5 percent in March, the biggest gain in four years. That followed a healthy increase in February, reflecting the release of pent-up demand after the severe winter. Economists, who had forecast sales advancing 0.4 percent last month, said a late Easter could have caused difficulties smoothing the data for seasonal fluctuations, causing the sharp swing from March to April. Prices for U.S. Treasury debt rose on the data, while the dollar gained against a basket of currencies. U.S. stocks rose marginally, with the Dow Jones industrial average and Standard & Poor’s 500 index both inching to record levels. Data such as employment as well as manufacturing and services industries surveys have suggested the economy regained strength early in the second quarter.

U.S. Inflation Data Awaited As Dollar Bulls Await Increase In Consumer Prices

Dollar bulls are expecting U.S. data this week will show consumer prices picked up last month, bringing inflation closer to the Federal Reserve’s 2 percent threshold it has set for considering a rate hike. The U.S. dollar index recovered from a 20-month low of 78.906 set last Thursday after European Central Bank head Mario Draghi warned that the euro’s strength was a serious concern and that the ECB was comfortable with taking more action to support economic growth and raise inflation at its June meeting. The strength of this week’s scheduled U.S. data releases which include the closely-watched April consumer price index (CPI) on Thursday and the bearing it has on Fed rate expectations will decide whether the dollar continues its turnaround. Consensus forecasts show April’s core CPI up 1.7 percent from a year earlier, unchanged from the prior month’s reading. Sentiment regarding whether the dollar will extend gains or weakens appears to be evenly split between dollar bulls and bears. Dollar bears maintain inflation remains low and highlight the Fed’s preferred gauge of inflation - the price index for personal consumption expenditures - which has run below 2 percent for 23 consecutive months. Fed Chair Janet Yellen warned last week about the risks posed to the recovery from the U.S. housing market slowdown, suggesting that the Fed may be in no hurry to raise rates.

That sums up today’s highlights! Keep posted with all the latest news and analyst updates via our Facebook, Twitter, Google+ and LinkedIn pages.

We hope you have a profitable day on the markets!

U.S. Economy Back On Track

Here’s today’s ‘Just A Minute’ bringing you a 60 second summary of what’s happening in the financial markets.

WHAT WE’RE WATCHING TODAY

U.S. Economy Back On Track As Strong Retail Spending Adds To Momentum

The U.S. economy is back on track after a difficult first quarter and it is not expected to cool off again anytime in the near future. A number of economic reports this week, spearheaded by sales at retail stores, are expected to show a faster pace of growth in April and May. Furthermore, trends point to the nation’s gross domestic product increasing in the second quarter after little growth in the first quarter of the year. Part of the snapback in growth reflects spending and investment that normally would have taken place in the first quarter had it not been for the severe weather. The prospect of the momentum extending beyond the second quarter is likely to rest mainly on whether companies continue to add workers. Job gains have averaged 238,000 a month since February which is the second best three-month stretch since the recession ended.

However, the recovery has been uneven since it began in mid-2009 and analysts are not ready to declare good times are here to stay after years of disappointing growth. The unexpected hiccup in the housing market is one of the biggest threats to the rosy scenario for the U.S. economy beyond the second quarter. Sluggish sales could dampen demand for a variety of goods that new owners need to buy for their homes and hurt retailers in the process. In April, economists predict that builders started work on more new homes and permits for new construction also rose. However, both permits and new construction are still likely to remain below the post-recession highs set in November and December.

CBI: U.K. Interest Rates Will Rise From Early-2015

Encouraging signs that the U.K. recovery is becoming more broad-based has led the Confederation of British Industry to raise its 2014 and 2015 growth estimates for the U.K. It now expects the U.K. economy to expand by 3 percent this year and by 2.7 percent in 2015, up from previous expectations of 2.6 percent and 2.5 percent respectively. Interest rates are expected to start rising in the first quarter of 2015. In the first quarter of this year, Britain posted GDP growth of 0.8 percent quarter-on-quarter, marking the fifth consecutive quarter of expansion.

However, as 2015′s general election looms, the CBI warned that political uncertainty could threaten the U.K.’s recovery and that the priority for the next government should be to keep the deficit reduction strategy on track, to tackle the U.K.’s economic challenges and to reform public services. The CBI also highlighted that business investment in the U.K. was on the rise. In the final quarter of 2013 it was 8.7 percent higher than the year before, and the trend is gaining momentum. It now expects business investments to grow by 8.3 percent this year and by 9.1 percent in 2015.

Is Beats Electronics Worth $3.2 Billion? Some Analysts Say Why Bother?

It was reported last week that Apple would be interested in acquiring Beats Electronics, the well-known headphone maker and music streaming distributor, for $3.2 billion founded by Dr. Dre. Although, at $3.2 billion this would be Apple’s largest acquisition to date, $3 billion is less than two percent of the company’s cash and less than ten percent of its annual free cash flow, in the overall scheme of things, it’s not a deal that is going to have a material impact on results. However, the change in Apple’s acquisition strategy will generate some questions for management and the Board of Directors. Some are struggling to see the rationale behind this move. Beats would undoubtedly bring a world class brand in music to Apple, but have pointed out that Apple already has a world class brand and has never acquired a brand for a brand’s sake. Beats does not have any intellectual property that would drive the acquisition justification beyond the brand. Instead, analysts believe that Apple’s cash should be utilised for acquisitions in the internet services space, which happens to be Apple’s biggest weakness. Traders will be watching the market for news…If Apple completes a $3.2 billion acquisition of Beats, Carlyle Group which owns just under 50% of Beats will bank a near $1 billion profit.

That sums up Monday’s highlights!

We hope you have a profitable day on the markets!

British Pound and Home Prices Continue Rising

Homes in the U.K. have become more expensive than they have been in a decade showed a report yesterday, as the sterling pound climbed to its highest levels in over two years against the dollar.

The British currency failed to gain only against one of its 16 major peers and economists anticipate that data will show an increased industrial output for October, which would make it the second month of expansion, as well as a smaller trade deficit. The signs are positive for the country’s economy, but Bank of England Governor Mark Carney noted in his speeech in New York yesterday that the recovery will need to be sustained for longer before it can cope with higher interest rates.

Responding to questions following his talk at the Economic Club of New York, Gov. Carny said that his policy of guiding the Bank of England forward has been “effective” in keeping short-term interest rates low and boosting the economy.

A Bloomberg News survey has showed that industrial production in the U.K. rose 0.4 percent after gaining 0.9 percent in September. Other Bloomberg surveys of analysts showed that manufacturing production increased 0.4 percent in October and the trade deficit fell to 9.2 billion pounds from 9.8 billion pounds in September.

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