The pound weakened against the US dollar yesterday by 1.25 cents to close the day at the 1.4553 level. This was on news that there was not enough interested parties willing to purchase UK government bonds. The British Debt Management Office reported that they could not sell their $1.75 billion gilts at auction, which is the first time this has happened in 7 years and raises serious questions about Britain’s ability to pay for its planned spending in the coming years. Trading was very choppy in the second half of the session after Treasury Secretary Geithner surprised the markets by suggesting he was open to expanding the use of the International Monetary Fund’s special drawing rights. Investors initially took this as an endorsement of China’s proposal on Monday to replace the dollar as the world’s reserve currency, however an initial sell off in the dollar was later reversed.
In today’s trading the market has remained around yesterday’s close ahead of the announcement of Retail Sales and Total Business Investment figures in the UK, whilst in the US Gross Domestic Product and Jobless Claims data will be released this afternoon.
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