Financial Markets Review by Lloyds TSB

The pound was little changed against the USD and rallied 1.1% against the euro. Much of the rally in GBP/EUR was triggered by a dovish ECB press conference.

US jobless rate climbs to 9.7%, yields and swap rates fall

The pound was little changed against the USD and rallied 1.1% against the euro. Much of the rally in GBP/EUR was triggered by a dovish ECB press conference.

Across emerging market currencies, the Brazilian real and South African rand have appreciated most as Chinese equities regain an upward poise.

The weakest G-10 currency was the SEK. The krona was sold heavily after a fall in the Swedish PMI series to 52.4 from the previous month’s 54.3. The Riksbank’s pledge to keep interest rates unchanged until mid-2010 also weighed on the krona.

Two-year bund yields fell back below 1.10% after the ECB announced it would not charge a premium at the next one-year tender later this month. UK 5y swaps ended the week down 3bp at 3.30%.

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