Daily Financial Market Outlook

Daily Forex Fundamentals | Written by Lloyds TSB | Sep 09 11 04:26 GMT

As was widely expected no policy changes were announced after either the MPC or ECB meetings yesterday. Despite the decisions votes seemingly being in line with expectations, the markets at least initially reacted with a degree of disappointment to this news. However, ECB Chairman Trichet's subsequent press conference which emphasised that the risks on both inflation and economic growth had shifted caused German bonds to rally and the euro to sell off. As usual there was no statement from the BoE following the MPC meeting and so no evidence as yet as to whether the Committee's thinking has also shifted, although this must be highly likely. The minutes of the meeting, which will be released on the 21st will provide the first information on this. In the meantime, in a further indication of how consensus thinking is shifting the OECD announced a downward revision to its global growth forecasts yesterday.

The August UK PPI figures released today are likely to signal a nearterm easing of inflationary pressures. Last month, sterling's tradeweighted index moved higher, while commodity prices have weakened. Together, these developments point to a fall in input prices. Meanwhile, producer output prices are expected to be unchanged. We still have longer-term concerns about the UK inflation outlook, but given mounting concerns about growth this is unlikely to be at the forefront of policy makers' thoughts for now.

In the euro area today's data on Italian GDP and French industrial production will provide further information on the real economy. Both are likely to be reassuring as they should show slow growth, rather than rapidly falling output. But as they both refer to the period before the current market turbulence gathered pace, they are likely to be seen by markets as old news.

UK remains vulnerable to global price pressures

About the Author

Lloyds TSB Bank

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.