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Forex Flash: UK declines in rates and credit justifies further easing – Goldman Sachs

The sharp fall in real rates and decline in sterling in recent weeks has put the UK in focus. These factors combined with a decline in credit spreads have lead to a marked easing in UK financial conditions. “The combination of sluggish growth, significant spare capacity and weak inflationary pressures will be sufficient to justify further easing.” argues the Economics Research Team at Goldman Sachs.

So far it is difficult to see in the broader market that UK equities have really benefited. Year-to-date the UK has been one of the weakest markets globally in dollar terms – in Europe only Italy has been weaker. This is all the more surprising given that a lot of UK earnings are dollar, or at least non-sterling, based. Indeed, only 19% of FTSE 100 company sales are to the UK; 45% of dividends are paid directly in dollars.

Ireland moves to launch 10-year bond auction for first time since 2010

Ireland may sell as many as €3.0 billion worth of 10-year bonds, perhaps as soon as today even, marking a new chapter in the financial recovery for the country. Ireland’s National Treasury Management Agency noted yesterday it hired Barclays Plc (BARC), Danske Bank A/S (DANSKE), Davy Stockbrokers, HSBC Holdings Plc, Goldman Sachs Group Inc. and Nomura Holdings Inc. as joint lead-managers for the transaction, “details of which will be announced in due course.” The bond was priced to yield 245 basis points over mid-swaps, a fixed- market benchmark.
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