FOREX TRADING

Euro-zone sovereign debt concerns continue to weigh on global asset markets, with the revelation that a Spanish savings bank had been taken into government control adding to the negative sentiment. Equity markets were again trading on the backfoot, with US stocks posting their fourth loss in five days, while Libor spreads continued to edge higher. In the US dollar markets, the spread between 3-mth Libor and the OIS rate widened to 29bp, its highest since July 2009, as fears that the debt problems in the Euro-zone could precipitate a wider global liquidity squeeze continued to mount. The euro came under renewed downward pressure against the major crosses, to end around $1.24, with the US dollar finding general support following the release of a much stronger-than-expected 7.6% gain in April existing home sales.

Today, the UK economic calendar is dominated by the second estimate of Q1 GDP. After the surprisingly strong 1.9% monthly gain in March industrial production, we and the market expect Q1 GDP to be revised up by 0.1 percentage points to 0.3%. In the US, the focus will be on the latest house price and the consumer confidence reports. Following the robust existing home sales report, we look for house prices to have made further headway, while US consumer confidence is forecast to have posted another rise, aided by ongoing signs of economic recovery.

Chart: Stronger-than-expected rise in March industrial production raises the prospect of an upward revision to UK Q1 GDP growth

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.