Financial Markets Review by Lloyds TSB

A powerful rally in equity markets and rising oil prices bolstered demand for commodity currencies and caused the dollar and the yen to weaken. The dollar index slipped close to the 2009 low of 78.334. The FTSE-100 has now rallied for 10 consecutive days.

Equity market rally lifts UK yields and swap rates

A powerful rally in equity markets and rising oil prices bolstered demand for commodity currencies and caused the dollar and the yen to weaken. The dollar index slipped close to the 2009 low of 78.334. The FTSE-100 has now rallied for 10 consecutive days.

£/$ returned to the upper end of the 6-week trading range, supported by equities, the BoE MPC minutes and strong UK retail sales data. The report of a 0.8% q/q contraction in Q2 gdp put paid to hopes of an imminent return to positive growth.

Stronger than expected data from the euro zone – the German IFO index rose to a 9-month high in June, caused the rally in £/€ to stall above 1.1656, but helped €/$ to close the week 0.59% higher.

The Colombian peso and S. African rand gained 2.7% and 1.4%, respectively against the dollar. The Korean won failed to draw any strength from a 2.4% q/q rise in Q2 gdp.

Positive Q2 earnings surprises from a handful of US companies and stronger than expected economic data weighed on government bonds this week and caused yields and swap rates to rise sharply.

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