Forex rebates on every trade - win or lose!

This is how the banks have reacted to what the BoE are doing.

Today - hot off the press 20 minutes ago

STERLING

TOM/NEXT 5.15 - 5.25

7 DAY 5.20 - 5.27

1 MTH 5.53 - 5.61

3 MTHS 5.86 - 5.94

6 MTHS 5.82 - 5.90

12 MTHS 5.70 - 5.80

Yesterday lunchtime

TOM/NEXT 5.20 - 5.25

7 DAY 5.20 - 5.28

1 MTH 5.58 - 5.66

3 MTHS 5.87 - 5.95

6 MTHS 5.84 - 5.92

12 MTHS 5.70 - 5.80

LONDON (Dow Jones)--Mr Darling has called on the G7 to devise a plan to calm credit markets.

He is not alone in calling for government intervention to bring an end to market turmoil. Mr Strauss-Kahn, managing director of the IMF, is also pressing for action at an official level to sort out the problems in the financial system.

Central bankers have been trying for more than eight months now to come up with measures that would alleviate the situation. Their efforts have helped contain the fall-out from the turbulence in financial markets but they have yet to restore orderly conditions.

It might be thought presumptuous of G7 finance ministers to suppose they could find a remedy for current ills when the central banks, with their deeper understanding of the workings of the markets, have so far failed.

However, finance ministers have an advantage over central bankers. They have control of taxpayers' money. What the clamour for G7 governmental intervention boils down to is a demand that funds from the public purse should oil the wheels of the credit mechanism.

The suggestion that the taxpayer should bear the cost of the market meltdown is bound to raise hackles. It will offend those purists who believe that bailing out the banking system by such means would introduce an unacceptable degree of 'moral hazard'. Nowadays, though, arguments based on 'moral hazard' get short shrift from bankers and politicians who fear the consequences if the pre-August 2007 status quo is not restored quickly. A much stronger practical objection, for governments at least, is that voters take a highly negative view of their tax monies being diverted to support the financial sector.

The electorate, by and large, does not see the linkages between the infusion of public money, the smooth functioning of the credit system and general economic well-being.

They are very likely to look askance at a process in which their hard-earned cash goes in at one end and remuneration for financial company managers, at a high multiple of the average, comes out at the other end.

The proposal that there should be a public subsidy so that senior bankers can go on living in the style to which they have become accustomed lacks widespread electoral appeal. The Northern Rock rescue presents a salutary example.

As soon as UK taxpayers realised that public money would probably be at risk, one way or another, in the resolution of the Northern Rock crisis, the ten-point opinion poll lead that Mr Brown's Government had hitherto enjoyed turned into a ten-point deficit.

Despite such headwinds, a strong tide is running in favour of government action. Mr Fisher, president of the Dallas Fed, recognised this when he said yesterday that current conditions in the USA differ from those in Japan in the 1990s. He is one of those policymakers who are sceptical of the benefits of using public money to resolve the crisis.

Throughout the 1990s, US observers urged the Japanese authorities to deploy public funds in freeing up their paralysed banking system. It was only in 2003, after more than a decade of recurrent financial problems and sub-par economic performance, that Japan bit the bullet and injected public funds into the banks. Subsequently, the debt malaise lifted very quickly. Though Japan's economic growth is still less than sparkling, this reflects structural factors, including demographic trends, rather than financial weaknesses.

If the present US situation were truly parallel to Japan's past woes, the case for using public money in resolving banking problems might appear strengthened.

Mr Fisher argued there was no true comparison between the US and Japanese cases. He pointed out that large banks and the state-owned postal system had dominated Japan's financial sector, whereas securitised asset markets were at the heart of US finance.

Though this is an important difference, it is not obviously relevant to the 'public money' argument. More to the point was Mr Fisher's contention, 'these are totally different societies, different economies, different political systems'. The ideological objection to state intervention in the free working of financial markets is likely to be much stronger in the USA than it was in Japan.

The US aversion to government involvement is likely to be especially powerful in an election year. Consequently, it seems unlikely that the G7 will fashion an agreed plan for dealing with the crisis. Pace Mr Fisher, the striking similarity between the US situation now and Japan in the 1990s is that both instances feature capital losses for financial institutions and uncertainty over the value of a wide range of balance-sheet assets. The USA has its own precedent for the use of public funds in supporting financial markets in the Resolution Trust Corp's operation in the early 1990s.

The RTC, however, administered the assets of failed mortgage lenders. There was no question of those mortgage lenders benefiting from its actions and, in the end, there was no net loss to the US taxpayer.

Now, the US authorities wish to keep hard-pressed participants in ABS and related derivative markets in being. They are probably fearful, with good cause, that if they were to take ownership of those institutions' impaired assets, there would be a substantial loss for the taxpayer to absorb.

The lesson from Japan's experience is that any public money used to free up the financial markets should be repayable by market participants. The prospect that a proportion of future profits earned by commercial and investment banks should flow back to the Treasury might dampen the competitive ardour and innovative flair of their management teams for a while to come.

But, on an objective view, that might be no bad thing.

FRANKFURT (Dow Jones)--The European Central Bank is widely expected to keep the key policy rate steady at 4.0% this week as euro-zone inflation remains at record highs.

Despite continued tension in the interbank money market, all 51 private-sector banks polled by Dow Jones Newswires expect the ECB to stay on hold Thursday. But most also forecast that the ECB to lower interest rates later in the year as economic activity wanes.

"With the spike in headline inflation and the German public sector wage deal, some of the worst ECB fears about second-round effects are on the verge of being realized," said Holger Schmieding, chief European economist at Bank of America.

Consumer prices in the euro zone rose at their fastest-ever rate and much more than expected in March, up 3.5% on the year. The ECB has aimed to steady inflation at just below 2.0% over the medium term.

A recent agreement granting German public-sector workers a nearly 8% wage hike over two years has been "clearly higher than we expected", ECB governing council member Axel Weber warned on Saturday.

"At a minimum, the ECB hawks will want to see clear evidence that this German wage deal remains an outlier, or whether it spreads to other sectors and countries. This makes a rate cut before the summer holiday unlikely," Schmieding said.

But weaker global demand, coupled with a stronger euro and tighter credit conditions, will eventually put a damper on euro-zone activity. Private-sector economists expect the annual growth rate to drop to about 1.6% this year from 2.6% in 2007.

The interbank euro money market, in which banks borrow funds from each other, also remains disrupted as banks continue to hoard cash despite a series of unprecedented liquidity provisions from the ECB.

"The ECB remains convinced that a way out to the crisis may be found by keeping rates on hold, and continuing to pump massively liquidity in the market to smooth out money market dislocations," Aurelio Maccario, co-head of European economics at UniCredit, said in a note to clients.

Since the onset of the financial crisis last August, the ECB has supported European banks through special liquidity tenders. It has also routinely allocated more liquidity than banks need to conduct their daily operations, and significantly lengthened the maturity profile of its refinancing operations.

Yet the Euro Interbank Offered Rate remains crisis levels. The closely watched three-month Euribor fixed unchanged at 4.742% Tuesday, the highest level since late December.

"As time goes by, the risk that the crisis will take its toll on the real economy significantly increases. Eventually, a rate cut should not be seen as a tool to solve the financial crisis, rather as a means to help the real cycle, which has just settled below-trend," Maccario said.

Seventeen of the 51 economists polled by Dow Jones Newswires expect the ECB to cut rates by at least one 25-basis point cut by the end of the second quarter, while the vast majority of economists said that rates will drop before year-end.


Below are the results of the poll of expected movements in interest rates:

===

2008 2008 2008 2009
Apr.10 2Q 4Q 1Q

MODE 4.00% 4.00% 3.50% 3.50%

High 4.00% 4.00% 4.00% 4.00%
Low 4.00% 3.50% 3.00% 3.00%

AIB Global 4.00% 4.00% 3.50% 3.50%
Banca Intesa 4.00% 4.00% 3.50% 3.25%
Banco Santander 4.00% 4.00% 3.50% 3.25%
Bankh. Lampe 4.00% 4.00% 4.00% 4.00%
Bank of America 4.00% 4.00% 3.75% 3.75%
Bank of Ireland 4.00% 3.75% 3.50% 3.50%
Barclays Capital 4.00% 4.00% 3.50% 3.50%
BayernLB 4.00% 4.00% 3.50% 3.50%
BBVA 4.00% 3.75% 3.50% 3.50%
BHF-Bank 4.00% 3.50% 3.00% 3.00%
BNP Paribas 4.00% 3.75% 3.25% 3.00%
Bremer LB 4.00% 4.00% 3.50% 3.50%
CECA 4.00% 4.00% 3.75% 3.50%
Citigroup 4.00% 3.75% 3.25% 3.00%
Commerzbank 4.00% 4.00% 3.75% 3.50%
Credit Agricole 4.00% 4.00% 3.50% 3.50%
DekaBank 4.00% 4.00% 3.75% 3.50%
Deutsche Bank 4.00% 4.00% 3.50% 3.25%
Dexia Bank 4.00% 4.00% 3.50% 3.50%
DKIB 4.00% 4.00% 3.50% 3.25%
Dresdner Bank 4.00% 4.00% 3.50% 3.50%
Erste Bank 4.00% 3.75% 3.50% 3.75%
Fortis Bank 4.00% 4.00% 4.00% 4.00%
Goldman Sachs 4.00% 4.00% 4.00% 4.00%
Helaba 4.00% 4.00% 4.00% 4.00%
HSBC Trinkaus 4.00% 3.75% 3.25% 3.00%
HWWI 4.00% 4.00% 4.00% 4.00%
ING 4.00% 4.00% 3.50% 3.50%
Invesco 4.00% 4.00% 3.75% 3.75%
JP Morgan 4.00% 3.75% 3.50% 3.50%
Julius Baer 4.00% 4.00% 3.25% 3.25%
KBC Asset Man. 4.00% 3.75% 3.25% 3.25%
La Caixa 4.00% 4.00% 3.75% 3.75%
LBB 4.00% 3.50% 3.50% 3.50%
LBBW 4.00% 4.00% 3.50% 3.50%
Lehman Bros. 4.00% 3.75% 3.50% 3.50%
Merrill Lynch 4.00% 4.00% 4.00% 4.00%
M.M. Warburg 4.00% 4.00% 3.50% 3.25%
Morgan Stanley 4.00% 4.00% ---- ----
Natixis 4.00% 4.00% 3.50% 3.25%
Nordea 4.00% 4.00% 4.00% 4.00%
NordLB 4.00% 4.00% 3.50% 3.50%
Postbank 4.00% 4.00% 4.00% 4.00%
RZB 4.00% 3.75% 3.50% 3.50%
SEB 4.00% 3.75% 3.25% 3.00%
Societe Generale 4.00% 3.75% 3.25% 3.25%
Standard Chartered 4.00% 4.00% 3.50% 3.50%
UBS 4.00% 3.75% 3.00% 3.00%
UniCredit 4.00% 3.75% 3.25% 3.00%
Voeb 4.00% 3.75% 3.75% 4.00%
WestLB 4.00% 4.00% 4.00% 4.00%

( TF ) 04/08 15:52
OUTLOOK European, US data due Wednesday, April 9


- LONDON (Thomson Financial) -

EURO ZONE

-The final reading for GDP growth in the fourth quarter is expected to be left unrevised at 0.4 percent quarter-on-quarter, and at 2.2 percent from the previous year.


GERMANY

-The trade balance is forecast to decline to a surplus of 15.2 billion euros in February, from 17.1 billion in the previous month.


UK

- Economists expect growth in UK manufacturing output to slow to 0.1 percent in February from 0.4 percent in January, though base effects mean the annual rate is forecast to rise to 1.5 percent from 0.6 percent.

The wider measure of industrial output should rebound to show 0.2 percent growth from a 0.1 percent decline.

Neville Hill, economist at Credit Suisse, said manufacturing output is unlikely to change markedly but noted there are several positive factors underpinning the sector.

'Business surveys (in January) remained at levels consistent with output rising and the depreciating currency may also have provided some support,' Hill said.


U.S.

- Wholesale inventories are expected to have increased 0.5 percent in February, three tenths of a point less than in the previous month. Meanwhile, wholesale sales are expected to have increased a meagre 0.2 percent in February following a 2.7 percent increase in the previous month.

'While inventory-to-sales ratios in the wholesale sector remain at historical lows, we believe firms will become increasingly cautious in their stock building in the face of a slowing US economy,' said economists from Lehman Brothers.

LONDON (Reuters) - Interest rates can fall because inflation is low, Prime Minister Gordon Brown said on Tuesday, two days before a Bank of England interest rate decision and despite forecasts for higher inflation this year.


Must be me, but I had thought the BOE set interest rate levels! Something to do with independence. JT

JGT

Surely Brown can still pass an opinion?

If inflation is low, then surely interest rates do not have to go up to bring inflation down? Pro-rata, interest rates could come down, since inflation is low.

Of course the PM can put forward his views, and he should. However the timing is important, as it comes just before the MPC meeting. So essentially he is saying cut the interest rate before all the facts have been considered and filtered for evaluation at the meeting and placed pressure on the decision makers. Still as he appoints most of the members of the MPC, I am sure they will heed his words carefully.

Re Inflation, I haven't noticed it falling of late, it remains stubbornly high. Of course you could refer to an Index that does not really reflect the cost of living (the Governments preferred one does not have an allowance for home rental costs etc) and while the economic picture was rosy, that was OK, but ask people on fixed incomes if they think the cost of living has gone up recently, and they will, I feel sure, say that it has (and that was before the recent rather large increase in Council Taxes). So at this time I think the decision to cut rates is an even bet, as Hils postulated earlier. Remember the BOE remit is inflation, and nothing else. So we will see what this week brings, perhaps a 25 basis point cut perhaps not. But the BOE statement, also on this thread courtesy of Hils prudent news watch, suggests that the interbank lending market is still very tight, and even a BOE rate cut this week may not mean Banks will lower Mortgage costs. JT

Up to now Brown has avoided explicitly suggesting what the central bank should do and Tuesday's remarks are unlikely to go down well with the staunchly independent bank.

"It's getting pretty close to the line," said Vicky Redwood, an economist at Capital Economics, although she stressed Brown may have been referring to the two previous recent cuts.

George Buckley, chief UK economist at Deutsche Bank, said the members of the interest-rate setting Monetary Policy Committee would not be swayed by any comments from Brown.

"The Bank will do what it wants to do. Gordon Brown saying we can cut rates will not mean the MPC will do anything differently. These guys are accountable to parliament."

The Bank of England declined to comment.

Well I've just subjected myself to actually watching the interview. Listening to him is normally bad enough, but seeing Mr Brown's face contortions when he draws breath just makes my skin crawl.

There has been a credit crunch.
Is he implying it's over then?

People are forecasting that British growth will be higher than growth in other countries who are equally affected by what is happening.

I dunno how he has got away for so long with such platitudes.

And the FOMC minutes

Stresses in financial markets had intensified noticeably
since the January meeting. Several meeting participants
noted that price discovery for mortgage-related financial
assets had become increasingly difficult in an environment
of declining house prices and considerable
uncertainty as to the ultimate extent of such declines.
With the magnitude and distribution of losses on mortgage
assets quite unclear and many financial institutions
experiencing significant balance sheet pressures, many
lenders pulled back from risk takingnotably by increasing
collateral margins on secured lendingand
liquidity diminished in a number of financial markets.
In these circumstances, many market participants were
experiencing greater difficulties obtaining funding, and
meeting participants regarded financial markets as unusually
fragile. The new liquidity facilities recently introduced
by the Federal Reserve would probably be
helpful in bolstering market liquidity and promoting
orderly market functioning, but even so, the ongoing
strains were likely to raise the price and reduce the
availability of credit to businesses and households.
Evidence that an adverse feedback loop was under way,
in which a restriction in credit availability prompts a
deterioration in the economic outlook that, in turn,
spurs additional tightening in credit conditions, was
discussed. Several participants noted that the problems
of declining asset values, credit losses, and strained financial
market conditions could be quite persistent,
restraining credit availability and thus economic activity
for a time and having the potential subsequently to delay
and damp economic recovery.

TRhat sounds quite disatrous if you read between the gobbledee-dook, Choccy. ;-)))

That's the bit that screamed out at me, BigA.

I rather think tomorrow will see a sell-off, seeing as it hasn't happened tonight - when the media report it in words of one syllable.

;-))

Recession fear caused US rate cut

Some Fed members wanted a smaller interest rate cut
The US Federal Reserve cut interest rates by 0.75% last month because some of its members feared a "prolonged and severe" economic downturn.

The minutes of its March meeting, when rates were cut to 2.25%, showed that policymakers were concerned about the housing slowdown and credit crisis.

Just watched the interview myself. He's pretty much said interest rates are going to be cut.

But the BoE is independent of course, so surely they won't be influenced by El Gordo will they???

Choccie: Gordo always sounds to me like Darth Vader. He obviously had presentational training as he become PM to try to cure hime of that weird jaw movement when he pauses for breath. It seems to be returning.

The other creepy thing is seeing him smile. It just ain't natural, like a dog walking on two legs.

08:30 *UK FEB INDUSTRIAL OUTPUT UP MONTHLY 0.3 PCT VS 0.1 PCT DECLINE IN JAN
08:30 *UK FEB MANUFACTURING OUTPUT UP MONTHLY 0.4 PCT VS UPWARDLY REVISED 0.5 IN JAN
08:30 *UK MANUFACTURING EXPORTS ACCOUNT FOR 29 PCT OF FEB OUTPUT, SEVEN-YEAR HIGH

LONDON (Dow Jones)--The dollar has broadly held steady in European hours, despite poor housing data and a gloomy economic assessment from the U.S. Federal Reserve Tuesday.

This relative stability in the currency partly reflects moves by Citigroup Inc. to offload some of its troubled debt - a development that has boosted risk appetite.

But it also offers a hint that dollar selling could be running out of momentum.

"In the short term, we believe that dollar selling attributable to cyclical weakness and credit market concerns may have reached a peak," said Geoffrey Yu, a currencies strategist at UBS in Zurich.

"Although significant challenges remain for the U.S. economy, and other credit-linked markets continue to show significant stress, the market is now scrutinizing cyclical weakness in other (major economies) and modifying currency exposure accordingly," Yu added.

UBS advises selling the euro against the dollar, and predicts that the euro will be around $1.47 in three months, from around $1.57 now.

There have been a number of false starts for a dollar rebound over the past few weeks, and some other analysts remain skeptical that the dollar can reclaim lost ground just yet. Nonetheless, the euro has been tied at around the $1.57 level in European hours, while the dollar has stuck to its recent range against the yen, hovering between Y102.25 and Y102.75.

Overnight, the Bank of Japan met expectations by keeping interest rates on hold at 0.5%. Also as expected, the Japanese parliament approved the appointment of Masaaki Shirakawa as the new BOJ governor, although it rejected the nomination of Hiroshi Watanabe as deputy governor.

Analysts see little chance of a shift in Japanese monetary policy for now. Although Shirakawa is expected to press for higher interest rates over the long term, global growth fears are expected to weigh on rates for now. The new appointment had no clear currency impact, but it does come as a welcome relief to markets, as the BOJ had been lacking a leader since March.

On the data front, sterling grabbed the market's attention for the second consecutive day. Tuesday, the pound fell sharply after data from lender Halifax revealed a surprisingly large 2.5% dip in house prices in March.

Then overnight, further U.K. data revealed the lowest levels of consumer confidence since May 2004, with the Nationwide index falling one point to 77 in March from February.

With a Bank of England interest rate decision looming Thursday, the currency remained under pressure at the start of European trading, and traders reported some flows in the euro at a shade over GBP0.80.

But the pound later strengthened slightly after data showed manufacturing output rose 0.4% in February, taking the annual rise to 1.9%. Economists had expected the monthly rise to be closer to 0.1%, and the annual figure to reach 1.6%.

The euro retreated to GBP0.7970 as sterling popped higher, while the pound edged higher against the dollar too, moving to a session high of $1.9724 from around $1.9685 immediately before the data were released.

In other data releases, figures from the European Union's statistics agency Eurostat showed that economic growth in the euro zone was in line with earlier estimates and with market expectations, at 0.4% in the fourth quarter, from 0.7% in the third quarter.

This slower growth reflects weaker consumer and government spending. But as the data had been widely expected, the impact was muted.

Looking ahead, Federal Reserve Chairman Ben Bernanke speaks on financial literacy at 1330 GMT, while Fed Governor Randall Kroszner will testify to Congress on the economic, mortgage and housing rescue bill at 1400 GMT.

Dallas Fed President Richard Fisher will speak about the economy at 1730 GMT.

Broadly, trading remains muted as traders prepare for interest rate decisions from the Bank of England and the European Central Bank Thursday. At 0956 GMT, the euro was trading slightly higher at $1.5729, from $1.5710 late in New York Tuesday, according to EBS. It was a touch lower against the yen, at Y160.97 from Y161.08.

The dollar was at Y102.35 from Y102.56, while the pound was lower at $1.9698 from $1.9704.

Alistair Darling has defended his forecasts for economic growth despite expectations that the International Monetary Fund will cut predictions for the UK this year to 1.6% later today.

The IMF figure contrasts with the Chancellor's own expectations of 2% growth in 2008, but Darling said the downgrade for the UK had been less severe than for other major economies.

"The IMF has downgraded every country's growth forecasts," he told Radio 4's Today Programme. "It's not surprising. We must not be complacent about what is happening at the moment."

Darling stood by predictions made in his debut Budget speech last month that Britain's economy would grow by between 1.75% and 2.25% this year and by 2.25-2.75% in 2009.

"Britain is better placed than other economies to withstand a slowdown in the global economy," he said.

"I remain optimistic that, provided we stick to the course we have set out and that we keep doing the right things, the economy will continue to grow," he added today.

The IMF is also said to have reduced forecasts for world economic expansion from the 4.1% announced in January to just 3.7%, the slowest pace since 2002.

Last July, the fund said it though the global economy would grow by 5.2% this year despite the US credit crunch.

The US is expected to grow just 0.5% in 2008, down sharply from the 1.5% predicted at the start of the year, followed by 0.6% growth next year.

Expectations for growth in the 15-nation eurozone have been lowered to 1.3% from 1.6%, which the IMF said affords some easing of the European Central Bank's policy stance.

Yesterday, the IMF warned that financial institutions' losses due to the credit crunch could approach $1 trillion.

The tightening of credit markets that began with the collapse of US sub-prime mortgages, but spread to other lending markets and countries, has already resulted in 193bn in losses, the IMF said, adding that this figure could potentially reach $945bn.

There was also gloomy news on housing Tuesday, with UK house prices down 2.5% in March, the biggest monthly fall since September 1992, according to mortgage lender Halifax.

I notice that Libor's off a bit more since yesterday. That might just give Mervyn a bit more to think about, what with the better than expected production numbers earlier.

STERLING

TOM/NEXT 5.10 - 5.20

7 DAY 5.10 - 5.25

1 MTH 5.52 - 5.60

3 MTHS 5.85 - 5.93

6 MTHS 5.82 - 5.90

12 MTHS 5.70 - 5.80