Extending gains realized post BoE minutes, the pound climbed to 1.9975 just shy of the key psychological level of 2.00. Although the rallying currency hasn?t seen 2.00 since April and before that the early 1980?s, active market participants are calling for a breach in resistance in coming sessions.
[B][U]UK Headlines:[/U][/B]
A shortage in UK five-pound notes in circulation has rendered the outstanding bills “increasingly soiled” In replacing existing notes the central bank hopes to spur a resurgence in utilization of the “fivers” by consumers.
- “[I]Bank of England Tries to Replace Disintegrating Notes”[/I]
http://www.bloomberg.com/apps/news?pid=20601068&sid=aYb3Cul0Ol1Y&refer=economy[I]-Source: Bloomberg[/I]
Closely monitoring the downfall of the sub-prime hedge fund from Bear Sterns, fearful investors bid down shares in major European financial stocks. - [I]“Banks drag FTSE into global slide”
[/I]Banks drag FTSE into global slide | Reuters
[I]-Source: Reuters UK[/I]
Carry-trades shorting the low yielding yen and purchasing higher-yielder?s such as the British pound and the New Zealand dollar continue to push the Japanese currency lower. - [I]“Selling drags yen to fresh lows”
[/I]Subscribe to read | Financial Times
[I]-Source: Financial Times[/I]
[B][U]UK Market Activity:[/U][/B]
[I][U]Currency Markets:[/U][/I] [B]GBP/USD[/B]
Extending gains realized post BoE minutes, the pound climbed to 1.9975, just shy of the key psychological level of 2.00. Even though the rallying currency hasn?t seen 2.00 since April and before that the early 1980?s, active market participants are calling for a breach in resistance in coming sessions. The sterling has benefited this week from the yield hungry carry-traders who have continued to bid up the 5.5 percent yielding pound. For the sixth consecutive trading day, the pound has scaled 15-year highs against the yen, hitting a high of Y247.88. Projected upbeat UK housing data to be released next week paired with enhanced interest rate speculation should support the cable?s uptrend going forward.
[U][I]Equity Markets:[/I][/U] [B]FTSE 100[/B]
Leading UK equities fell, driving the benchmark FTSE 100 index lower for a fifth consecutive day. Ringing the bell at 6,565.1, the index shed 0.3 percent led by the banking and mining sectors which supplied 60 percent of the session?s decline. US investor uncertainties over institutional sub-prime mortgage exposure spilled over in to UK market, with shares in Schroders and Royal Bank of Scotland selling off -1.7 percent and 1.3 percent respectively. Also hitting the wires was a Goldman Sachs & Co. downgrade of National Grid Plc. Noting an overvaluation, the natural-gas pipeline operator who held a “neutral” rating from the investment bank was demoted to a “sell” causing a retreat of 1.8 percent for the day. Up 6 percent for year, the FTSE is lagging the majority of European benchmarks and numerous portfolio and hedge fund managers are scaling down their forecasts for London shares. Many contend that BoE hawkishness, high government debt yields, and stubbornly elevated oil prices will erode the prospects of future growth in UK equities.
[U][I]Fixed-Income Markets:[/I][/U] [B]10-year Gilt[/B]
Yields on the UK long bond matched a nine-year high from earlier this week of 5.52 percent. Traders of the ten-year gilt have expressed mixed sentiment in the fixed-income markets, citing thin volumes and a lack of market moving data. Many believe that existing market conditions could evolve into volatile price action as many look to US news for a hint of market direction. Expecting a rate increase from the BoE as early as July, the implied rate on the December interest-rate futures contract traded at 6.26 today as it has averaged a 15 basis point premium to the central bank rate for the past decade.
