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What Are The Markets Facing?
The UK trade balance will release tomorrow and weak numbers may possibly take the British pound below 1.96 against the US dollar. The price movement in the stock, bond and currency markets suggests that traders should not wait for good news. Last month, industrialized PMI fell to the lowest level since 2001. Because the export orders component of the report also worsened, it is likely that the UK trade shortage will keep on growing. As the Bank of England’s financial policy meeting coming up, many people are concerned about the chances of a rate cut this year. Current data shows that the UK economy is in serious difficulty and a depression could be imminent.
Bonds
Frequent dissatisfaction in economic data has motivated UK bond prices higher. The market has gone from pricing in a rate hike by the Bank of England sometime this year to the minor likelihood of a rate cut. If the trade balance misses, bond prices could go to resistance at 107. If it surprises to the upside, it is likely to indicate a move back to support at 105.29 but that might not happen because even if the trade numbers are good, they will not be sufficient to influence the Bank of England to raise interest rates.
16:06
Posted on Jul-10-2008
