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Following updates here over the past few days looking at the GBP/USD, the Bank of England is poised to lower rates on Thursday. Given the £40 billion tax increase from the government last week such a monetary response would make sense. The problem is; at the same time the Government has substantially increased the level of borrowing and that has put pressure on the Gilt (UK government bonds) market and forced yields higher. The UK debt market buyers may require even higher levels of return, given the huge debt increase. Well, so far those higher yields have not exactly supported the Pound very much have they? Certainly, it looks like the FTSE 100 would benefit from another rate cut this week from the Old Lady (Bank of England), but this budget has put the BOE in a difficult position this week. So, what might be good for the FTSE is not good for the Pound and one will surely have to give way to the other before the week is out. That is unless we see significant overseas buyers of Gilts forced to buy Sterling in order to invest. The GBP/USD is still balking at that 1.30 handle for now though, currently trading at 1.2980
Well, you were alerted to something rather strange going on this afternoon in Gold and since then the metal has taken another lurch lower. This time...
The US stock markets have not long reopened for the final trading session of the week. It has been a very modestly higher opening across the board...
Given the reaction in the GBP/USD and the USD/JPY after the US sales data you might easily be forgiven for thinking the EUR/USD should be above 1.05...
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