Financial Markets Review by Lloyds TSB

Sterling faced considerable selling pressure this week as expectations grew that the Bank of England may charge negative interest rates on commercial bank deposits. A fall in short-term yields weighed heavily on sterling.

Sterling sold on concerns Bank of England may charge for holding deposits

Sterling faced considerable selling pressure this week as expectations grew that the Bank of England may charge negative interest rates on commercial bank deposits. A fall in short-term yields weighed heavily on sterling.

In emerging markets, Latin American currencies have underperformed, falling against the USD. Some of the weakness was triggered by selling pressure in commodities in the first part of the week.

Across markets, the USD index was unchanged on the week and equities, the S&P500, could rally only 0.4% despite a plethora of strong economic data.

UK 5y swaps fell to an intra-week low below 3.30% and 2y yields dropped below 0.90%. Speculation that the BoE could impose negative interest rates on commercial bank deposits added downward pressure on yields.

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