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Forex Flash: Will fed surprise markets with rate changes? – Goldman Sachs

FXstreet.com (Barcelona) - According to the Economics Research Team at Goldman Sachs, “The real risk in present day for 10-year US treasuries is less from a 1994-style move in short rates, and more from an increase in long-dated yields. However, the sea-change in the Fed’s operation and communication strategies since 1994 makes us more confident that the Fed will not intentionally surprise markets, and it has more tools to moderate the pace of any unwarranted increases.”

Differences in exposures between 2012 and 1994 also point to a more reassuring conclusion: a larger share of the fixed income market seems to be in the hands of unleveraged market participants; leveraged holders (US banks) have a significantly smaller share of USTs; and bank leverage has declined.

Forex Flash: The UK is the first G7 country to report Q1 GDP - BBH

Brown Brothers Harriman analysts note that looking towards UK GDP, the market had been prepared for a +/- 0.1% reading, and the upside surprise of a 0.3% expansion sent sterling to almost $1.5450, the highest since February 20.
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Forex: EUR/USD erases gains to 1.3030 on NY opening

Following the drop to 1.2956 spike low yesterday on weaker German IFO survey, rising chances of a ECB rate cut, the EUR/USD has been stronger today and rose towards this week’s highs, printing a new one at 1.2994 high in reaction to German Chancellor Merkel comments, saying that higher interest rates would be better for Germany. However, profit taking there is erasing the daily gains and sharpened the drop on the NY opening.
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