Today's UK economic forecast...mostly gloomy, with a few bright spots:

FSA to launch probe as rumours hit UK banks:

"The Bank and the FSA are believed to be livid with what they see as short sellers trying to profit by spreading inaccurate stories.....HBOS appeared to be the main target of this morning's speculation. Its shares tumbled as much as 17pc on rumours that it had applied for emergency central bank funding despite a clear denial."

Sounds reasonable, although looking at the HBOS chart for the last year, there is clearly something wrong in this company.



The company came out to completely deny the rumours, and stated "HBOS is one of the strongest financial institutions in the world with a balance sheet of £660bn". Well I don't know about you, but I don't know if admitting to having £660bn of what will mostly be loans and mortgages within a crumbling UK economy and a faltering housing market is a good thing!

In other gloomy news for the UK, and possibly a good tell on the econony, pubs are having problems...

Shares in Mitchells & Butlers crashed today after a City analyst suggested the owner of the All Bar One and O'Neills chains may be running out of money...(the) shares tumbled as much as 18%.

If All Bar One, a chain that seems consistently busy whenever I go, is having problems, I'm guessing all the pubs are. In fact just 12 days ago, Wetherspoon's were out with a 13 percent fall in profits, with like-for-like revenue down 2% year-on-year (so I'm assuming in real terms, or in units sold, down a good bit more than that). A sign of a discretionary spending slowdown? Perhaps.

On a positive note, UK manufacturers defy the gloom:

"Strong overseas demand for British manufactured goods is driving growth in the sector, while prices are rising at the fastest rate since 1995."
"Textile firms and chemical and food manufacturers in particular reported higher export orders."

Well I am shocked. I didn't even know the UK still had a manufacturing sector! I'm not surprised the weak pound is helping though, Sterling has plunged against the Euro, from 1.48 six months ago to 1.27 today (or if you prefer the inverse, 0.675 to 0.79). I even read somewhere that the pound actually did worse than the dollar in 2007, on a trade-weighted basis.

Well I'm glad it's working out for someone, because my European holidays have become a lot more expensive and my income from savings is about to take a hit as interest rates are set to be cut:

"The Bank of England is poised to cut interest rates as soon as next month, experts have predicted after it emerged that two Monetary Policy Committee members voted for lower borrowing costs a fortnight ago."
"The minutes coincided with data from the Office for National Statistics showing that unemployment remains at a record low and wage inflation has yet to pick up to worrying levels. A survey from business lobby group the CBI also showed that the manufacturing sector unexpectedly gained strength in March."

Not entirely sure how cutting interest rates, record low unemployment, wage inflation to pick up and the manufacturing sector go together, but it seems that's the way central banks work nowadays. Except Australia, which look set to hike rates from 7.25% to 7.50% to control inflation. Now there's a real central bank. I could see a real breakout of GBP/AUD happening, indeed it seems to already be underway: