Forex rebates on every trade - win or lose!

( TF ) 05/12 06:00
OUTLOOK BoE Inflation Report to show rate cuts still hindered by price risks


- LONDON (Thomson Financial) - The Bank of England will likely paint a downbeat portrait of the economy in its Inflation Report on Wednesday, as rising price pressures accompany a fall in growth, confirming the general consensus that interest rates will be cut only gradually.

A recent raft of surprisingly weak UK economic data has raised speculation that the central bank may cut rates more aggressively, but Thursday's decision to leave them unchanged suggests the BoE remains particularly concerned with inflation.

'While the outlook for growth points to the need for much lower interest rates, the Monetary Policy Committee is likely to continue to deliver the medicine in fairly small doses until inflation pressures eventually start to abate,' said Jonathan Loynes at Capital Economics.

So far, that has meant a rate cut every other month, making a move in June a near certainty.

In compiling the Inflation Report the MPC would have had access to the CPI data -- due for official release on Tuesday and forecast by the market to rise to 2.6 percent -- so the decision to leave rates unchanged indeed suggests the figure may have proved uncomfortably high.

In the previous report in February, the central bank's main forecast was for CPI to breach the 3.0 percent upper threshold and for GDP to dip below 2.0 percent during the year. Analysts believe both of those estimates will be stretched further -- inflation higher and growth lower.

Since the last report, the bad news has largely outdone the good news. A recovery in equity markets and a depreciating pound have been overshadowed by drops in house prices, weaker retail sales, unrelenting credit problems, and increasing pessimism among both business and consumers. Overseas, the economic situation has deteriorated in the euro zone and remains weak in the U.S.

On the prices side of the equation, however, inflation expectations as measured by both the BoE and pollsters GfK have hit series highs. With oil, food and commodity prices breaking new records daily and all surveys showing rising price pressures for companies, the MPC will be unwilling to appear complacent.

'The Inflation Report and subsequent news conference will reject market expectations for 60 basis points of rate cuts from here on, and instead endorse one or at most two cuts of 25 points each,' said Amit Kara at UBS.

He expects Governor Mervyn King's comments to reporters to emphasise that the economy needs to go through a period of sub-trend growth in order to pull back inflation expectations towards their historical averages.

But the worry that hangs over many economic forecasters is that the longer the BoE drags its feet in loosening monetary policy, the more it might have to play catch-up later in the economic cycle, once the inflation 'hump' has passed.

'The slower interest rates fall, the deeper the downturn in the economy is likely to be and the further rates will ultimately have to go to prompt a recovery once inflation concerns have finally eased,' said Loynes at Capital Economics.

He estimates Bank rate will have to drop as far at 3.5 percent next year, beyond the market consensus for a trough of 4.25 percent.

SC, thanks for that, useful and good reminders as I havnt been trading from some time.

Spacie,

After Seymour mentioned trend, I thought I'd paste up a chart for you to demonstrate what he meant. This is a 5-minute cable chart taken a few minutes before the data.



The uppper indicator is a form of macd on the 5-minute timeframe. The lower indicator is the same form of macd, except it's for 15-minutes which has been transposed onto the 5-minute timeframe. Both of those indicators say BUY. In addition, the light blue line under the price bars represents a trailing stop loss for a long position.

The price has pushed on 40 or 50 pips with the news validating the long position. My point is that, even if the news had been dire and cable had reacted down, my personal stance would not have been to have sold the market until the 2 indicators had both turned down and the stop had been breached.

I'm not saying that's the best way or the most profitable way, but it's certainly a safe way.

Remember. There are old traders and there are bold traders. Do you know any traders who are both old and bold?

Hil: First said of the U.S. Mail pilots

"Don't be a show-off. Never be too proud to turn back. There are old pilots and bold pilots, but no old, bold pilots."

E. Hamilton Lee, 1949

Well I never new that, DelBoy. Mind, it is more your era I guess.

:o)

Another thing that you may not know: Bill Boeing won the contract to take the U.S. Mail from Seattle to the Alaska Territory in 1919. He couldn't find suitable planes, so he had to start building his own designs. Seems it got out of hand.

Hi everybody, hope you've all wintered well and are trading positively. Got back to(not so sunny) spain just over a week ago. Had an amazing time as a saisonaire, recommend it to anyone regardless of age, sex or creed, just need to be in reasonable condition to handle the long hours and pick a good resort! Had problems with my internet in france and havent looked at a computer screen for 3 mts.(apart from booking airline tickets).

Feel a bit of a virgin sat in front of my screens, having a good first day sofar(except hitting the buy button instead of sell one to take some pips of the table), currently long eur/jpy and short usd/cad( not so sure about this one, stops at breakeven. euros looking sexy atm

Moving anywhere nice hils or just got fed up with the......

Welcome back, Gofe. You sure picked a great winter for the snow.

We're not moving anywhere flash ........ just a little gaff on the estate up the road. It's a bit like Brookside Close really.

My old man's always wanted a room with one of these.



:o)

strange, missing post! I replied to Hils post with the chart saying thanks but its missing !

strange, missing post! I replied to Hils post with the chart saying thanks but its missing !

Morning All,

No positions at moment. Really pleased with the Tradestaion platform. Tons of great features and in the process of programming some automatic strategies.

You can place trendlines on a chart and get alerts when they are hit or even enter orders for you. Been trying out in simulation, placing manual trendlines that I want to trade off and let it place the orders for you and its working a treat. Shame the profits aren't for real ! Though when I am confident with the platform I'll start doing it for real.

Hi Foxy,


May I suggest you keep your real order entries on TS to single figures to start with as you adjust to slippage. Although they are getting better. They are coming to London shortly for in-depth training. If you are not already aware / interested let me have your email address and I will send you details. Good trading. JT

Hi Johngtudor,

Thanks for the warning with Tradestaion. Shouldn't effect me too much as I tend to go for the bigger swings so a few pips slippage here or there wouldn't be an issue.

I'll pm you later with my email address as the training sounds interesting. Thanks

JT, just sent you a pm thru moneyam.

Hi Foxy,


Thanks your last. Unfortunately the trading gods went against me and just after posting that msg to you yesterday they killed my ISP connection. I spent many mins talking to someone in India, it was ghastly! At the end of the day it was something done to the network and not my kit, but could I persuade India man that was the case...no way, and it made me very angry! Going to purchase another ISP connection now as backup. Anyways, sorry I missed the pm, please try again. Cheers, JT

I really do think this little snippet is possibly the start of something big. Actually, I think it will end up being massive. It's something that I've been thinking for some time and is going to affect oil and metals big time over the coming months and years.

Next years news today! You heard it here first. :o)

China tells US to back off pressure on Yuan


Reuters reports that China's envoy to the US says the Yuan has already risen quite a bit and that the US needs to reduce pressure and give it more to to deal with exchange rates. The envoy says the exchange rate is not the source of the US-Chinese trade imbalance.

If the Chinese think they are under pressure now, just wait until the fall political campaigns. The Bush administration has taken a firm but civil stance with the Chinese, led by Secretary Paulson who has particular expertise in the region. Paulson has kept Congress, who's natural instincts are to erect trade barriers, from flying off the handle so far. At some point, they may not be able to restrain the beast.

Hil: The exchange rate isn't the source: it's the indicator.

I don't think that the dominance of China in manufacturing has fully penetrated the American (or, indeed, British) consciousness. I have a mound of anecdotal evidence to support this. Manufacturing industry in the UK has been slaughtered. It's the same in the U.S. It's almost impossible to buy stuff that doesn't say 'Made in China' on it. Even Apple's iPhone carries the legend 'Designed in California, assembled in China'. Within a few years, Airbus will assemble in China.

Trade barriers are, of course, just a palliative: the symptoms of the disease will be temporarily numbed, but the underlying disease -- uncompetitiveness -- will rage on.

Even in these times, there is hope for the UK -- or London, in particular. It is still the world's financial capital -- now, if we could just have a Government that isn't so stupid as to attempt to destroy that as well, with their envy politicking.

Both EUR JPY & Fiber at interesting points now - the former hitting resistance at 163.00 and the latter struggling with 1.5485.

Interesting chart SC,

I think E/U is going to retrace higher before it moves into a medium to longer term downtrend. Either way, I'm standing aside from it at the moment. See what the news brings later today.

As for E/J, I think it is all set up for a significant move down and have been monitoring when to get in for a medium term trade for a while. I'm short from 162.72 with a view of build up a decent position in it as it continues to move down. (Hopefully! )

Hi FF, I've found the last two days really hard, whipsawed all over the shop. Didn't help by making a stupid "broke the rules" trade on Tuesday which gave me a small loss! Thanks for your thoughts on E/J. I'm probably not going to make any trades today, then have a look over the w/e.