Financial Markets Review by Lloyds TSB

In the G-10 currency space, the pound ended the week in the middle of the league – the pound did manage to rally against the US dollar, with GBP/USD closing the week 0.7% higher at $1.6582.

BoE expands QE to £200bn, sterling strengthens

In the G-10 currency space, the pound ended the week in the middle of the league – the pound did manage to rally against the US dollar, with GBP/USD closing the week 0.7% higher at $1.6582.

The US dollar fell after the labour market report. The US unemployment rate rose to its highest since 1983, hitting 10.2% in October.

The rise in global PMIs supported equity markets and emerging market currencies. The South African rand also benefited from the rise in the gold price to a record $1,100 per ounce.

The European Central Bank left the refinancing rate unchanged at 1%, in line with market expectations. ECB President Trichet noted that “not all our liquidity measures will be needed to the same extent as in the past”.

The underperformance of gilts vs Treasuries and bunds was accentuated on Wednesday when the BoE decided to increase QE by ‘only’ £25bn to £200bn. UK 5y swaps touched 3.49%, the highest since August 28th.

Full Report

http://www.forexhound.com/downloads/061109FinancialMarketsREVIEW.pdf