Fall in Equities Boosts Government Bonds

Financial market review - foreign exchange

After a strong start to the week, sterling gave up much of last week's gains versus the dollar. Against the other G-10 currencies, however, sterling outperformed, registering gains of 2.5% versus the New Zealand dollar and 1.66% versus the Canadian dollar. EUR/GBP continued its descent, hitting a fivemonth low of 0.8651 following continued concerns over public finances in Greece and strong UK CPI data early in the week. The USD took another leg higher as equities moved lower during the course of the week on concern over the impact of Chinese tightening measures on global growth, banking sector reform proposals by the US government and weaker Q4 US corporate earnings. The Brazilian real dropped a further 2.4% versus the dollar and 1.7% versus sterling.