U.K. Recession is Likely, Says Confederation of British Industry

Daily Forex Fundamentals |  Written by DailyFX |  Sep 15 08 11:49 GMT | 

Fundamental Headlines

• Crisis on Wall Street as Lehman Totters, Merrill Is Sold, AIG Seeks to Raise Cash - Wall Street Journal
• The Japan Lesson: U.S. Must Own Up To Its Bank Crisis - Wall Street Journal
• ECB and Bank of England inject funds - Financial Times
• China Reduces Interest Rates for First Time in Six Years as Economy Cools - Bloomberg
• Oil Falls Below $97 as Ike Spares Refineries, Lehman Collapses - Bloomberg

EURUSD - ECB Vice President Lucas Papademos said that the central bank expects 'sluggish rate of growth in the third quarter,' but went on to say 'that the recovery will start at a faster pace in the fourth quarter.' He also noted that 'we may witness another rise in the price of oil and commodities, which may have adverse implications for prices developments.' The mixed comments suggests that the ECB will not look to cut rates anytime in the near future, and may hold a neutral policy stance until 2009.

GBPUSD - The Confederation of British Industry (CBI) said that the U.K. economy was likely to have entered a rescission, and lowered their growth estimates to 1.1% from 1.7% for the rest of the year. The focus group expects economic growth to fall 0.2% in the third quarter, and 0.1% in the fourth quarter, and also lowered their 2009 forecast to 0.3% from 1.3%. The downward revision falls in line with a recent poll by Reuters, which showed that economists estimate a 55% chance that Great Britain will fall into a recession over the next 12 months.

USDCHF - Swiss retail spending surged to 6.2% from 0.7% in June as resilient labor demands helped to boost personal spending. The increase was much stronger than the 2.3% rise expected by economists, and has certainly helped to improve the growth outlook for Switzerland. The breakdown of the report showed that discretionary spending for electronics picked up the biggest gain as its rose 14% from last year, while automotive sales increase 4.8%. Meanwhile, producer and import inflation pulled back from a 19 year high as oil prices retreated from a record high in July. The index slipped to 4.0% from 4.9% in July, which crossed the wires lower than the 4.3% increase forecasted by economist.

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