Daily Financial Market Outlook

Daily Forex Fundamentals | Written by Lloyds TSB | Aug 12 09 04:04 GMT |

Overview There are a range of important events and economic data that could impact today. Amongst them is the US Fed decision on interest rates but also crucial is whether it will expand its quantitative easing programme. The decision on rates seems fairly easy: the Fed will leave them on hold at 0-0.25%. But the decision on QE is more complicated. On the one hand, the Fed has spent $243bn of the $300bn allocated in March and is set to burn through the rest before the next FOMC meeting in September, and so might want to wait until then before making any announcement. On the other hand, if the Fed waits too long that could unsettle markets and potentially create a crisis just in time for the September FOMC. Hence, the Fed will have to say something about what it intends to do about QE at this FOMC meeting. In the UK, the focus will be on the economic message contained in the Inflation Report due out today, and the press conference to follow by Mervyn King, the Governor of the central bank. This will follow the decision to spend £50bn on QE, which shocked the financial markets and some commentators. Data and events preview UK labour market data will show whether the slower pace of job losses persisted into June. With the sharp drop in gdp in Q1 and Q2, unemployment could be worst then expected. Wage inflation is low though, which may help to maintain employment. Other key data include US and EU data on trade, output and inflation. Chart a Chart b Lloyds TSB Bank http://www.lloydstsbfinancialmarkets.com Disclaimer: 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.