Financial Markets Review by Lloyds TSB

GBP/USD trades above $1.70 as UK economic data provide a series of upward surprises. Purchasing managers’ index (PMI) data suggested that both the manufacturing and service sectors had moved into expansion in July.

BoE expands quantitative easing, but yields surge on US jobs data

GBP/USD trades above $1.70 as UK economic data provide a series of upward surprises. Purchasing managers’ index (PMI) data suggested that both the manufacturing and service sectors had moved into expansion in July.

The Bank of England increases the size of its quantitative easing programme by £50bn to £175bn. This caused sterling to reverse gains.

The Japanese yen has been the weakest of the G-10 currencies. A pro-risk environment and widening US/Japan interest rate spreads have supported USD/JPY over the week.

Gilt yields and swap rates initially fell on BoE QE announcement, but subsequently rebounded sharply on stronger than expected US non-farm payrolls data for July.

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