Forex Daily

The decision on interest rates is not an easy one to make for the US Federal Reserve. Production prices in the US have risen steeply to a rate last seen back in October 1981.

The indicator on producer prices rising is that the retail market will also follow. The simple fact is that if inflation prices rises much more there will be no chance of cutting interest rates.

The limitation which could be imposed on the Federal Reserve is clear.

Retail sales were on the up for the UK in th month of January according to official figures. Growth rates were steady and this was thought to be down to big price cuts. The retail market saw growth of 0.8% last month with the biggest discounts being on electrical goods.

The last three months before January saw a different story, this is thought to delay any interest rate cut for the UK, if indeed there is likely to be one at all.

A slowdown for the UK economy looks likely but it is expected to be somewhat less severe than first thought.

The debate is still going on about the troubled UK Bank Northern Rock. It seems the decision to nationalise the Bank is prompting the government to try and go for a public ownership approach if indeed that is only temporary.

The debate will go to the commons where they will decide on the Banks share and indeed the level of compensation shareholders will get.

Yesterday saw the Yen drop compared to most other currencies. The data released on US retail sales is thought to have had a major impact. Sales gained 0.3% for the month of January 2008 despite the expected financial experts feelings it would decline by 0.3%.

The US are now worrying less about a recession within the economy after seeing the growth in retail sales. This should be some comfort to the rest of the global economy.

There is it seems only limited scope for further interest rate cuts from the UK. The rate at which cuts will be implemented is to slow down sharply towards the end of 2008.

Inflation though will be over the target of 2% as set by the government and there are thoughts that the rise could be as much as 3%.

The Monetary Policy Committee does not plan to cut rares as much as the markets had anticipated. We know that there is a fine balancing act which needs to take place between interest rate cuts and the rise of inflation.

The UK producer prices rose sharply in January making the pound higher than most other currencies in January. It’s thought that this announcement about producer prices will perhaps limit the initial feeling that interest rates will be cut once more.
The Bank of England are to issue their inflation report on Wednesday.

Meanwhile, the Yen and the Swiss franc also remain strong.

The strength of the Euro is coming into question from many economic experts this week.If certain regions had lower interest rates companies that are currently sruggling could be helped from the impact of the Euro as a strong currency.

The Bank of England had cut the UK interest rates again with a drop from 5.5 % to 5.25% after worries that the economy may be on a go slow. The interest rate cut is no surprise to leading economic analysts who had predicted is for some weeks. Ths UK interest rate cut comes after the US Federal Reserve cut borrowing costs down from 4.25% to a mere 3%.

The fear of rising prices meant that the Bank of England were not quite as strong in their move and they wanted to make sure that inflation and growth maintained a healthy balance.

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House prices in the UK have suprisingly remained unchaged from last december. The January figures exceeded most people’s expectations. This financial news came from the Halifax UK who are a banking group.

Mortgage lenders are still saying that there are continuing signs of weakness in the housing market.The UK econcomy is still growing remember but there are thoughts that the market will remain flat this year.