Economics Weekly By Lloyds TSB

The pound bounced back this week as UK/EZ interest rate spreads turned positive, supporting GBP/EUR

Strong US GDP insufficient to halt equity market decline

The pound bounced back this week as UK/EZ interest rate spreads turned positive, supporting GBP/EUR

Government bonds and swap markets rallied sharply in the early part of the week in a flight to safety as equity markets sold off. Initially boosted by a large drop in US consumer confidence, fixed income markets pared back some of their earlier gains following a stronger-than-expected US GDP report.

The stronger outturn in the US GDP report led to a short term rally in equities and commodity linked currencies

The Norwegian central bank has become the third to begin tightening monetary policy

The USD rallied strongly against emerging market currencies as falling equity markets triggered large outflows from emerging markets

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