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Positive dynamics of the British debt market

Positive dynamics of the British debt market | 07 February 2022

07 February 2022, GBP/USD

GBPUSD trading plan:

The Bank of England's quarter-point interest rate rise - the second time since December - was widely forecast amid mounting pressure for it do something to clip a UK inflation rate that could top 7% this Spring. But the UK central bank was just one swing vote away from lifting policy rates by 50 basis points - what would have been the largest rate rise since 1995, two years before the BoE gained operational independence 25 years ago. And while money markets now see the Bank lifting its 0.5% policy rate another percentage point to 1.5% by yearend, only one more quarter-point rise is priced for 2023. The gap between 2-year and 10-year UK bond yields and equivalent money market and swap rates over the same horizon are now sliding - with 10-year gilt yields now just 21 basis points higher than the 2-year and the sterling overnight index swap curve over those maturities negative to the tune of 22 bps.

Investment idea: buy 1.3505 and take profit 1.3550.

David Johnson
Analyst of «FreshForex» company
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