The FTSE 100 index rose in early trading as the British pound collapsed, creating ripples across various financial markets. Meanwhile, the FTSE 250 index experienced a setback, losing over 3% in the past week. The UK bond market witnessed a significant sell-off, with 10-year Gilt yields reaching their highest levels since August 2008. As the GBP/USD pair languished near 14-month lows below 1.2300, the strengthening US Dollar intensified the currency pair's struggles.
The Chinese inflation data showed a modest increase of 0.1% in the Consumer Price Index (CPI) while marking the 27th consecutive month of factory price deflation at -2.3%. Despite supportive measures introduced by the People's Bank of China (PBoC), economic activity has yet to rebound. The combination of a weaker yuan and negative factory prices has alleviated concerns about global goods inflation.
The financial landscape also felt tremors from the digital currency sphere, as Bitcoin's price dipped below $96,000, leading to substantial liquidations of $694.11 million within 24 hours across the crypto market. Additionally, the Binance Coin (BNB) price declined by 4.58% over the past two days, settling around $696.40.
In the United States, the Federal Open Market Committee (FOMC) minutes highlighted persistent inflation fears. Members expressed concern that former President Trump's policies could potentially ignite a fresh surge in prices. Concurrently, UK treasury yields soared, pushing the 30-year yield to its highest point since 1998. Companies and individuals dependent on debt are anticipated to encounter higher borrowing costs due to this rise in UK treasury yields.
Rachel Reeves is expected to address market sentiment, announcing that the government plans to cover increased borrowing costs through spending cuts rather than raising taxes. This announcement comes amidst a backdrop where the EUR/USD pair maintains a downward trend, hovering around 1.0300.
Looking further into global economic indicators, the consolidation of the GBP/USD pair near its recent lows continues to reflect the strengthening position of the US Dollar. This shift has placed additional pressure on the British economy, already grappling with elevated bond yields and currency devaluation.
Across Asia, Chinese economic data paints a picture of continued deflationary pressures in its manufacturing sector. Despite attempts by the PBoC to stimulate growth through various measures, their efforts have not yet resulted in a significant resurgence in economic activity. The ongoing decline in factory prices combined with a weaker yuan provides some relief from fears of escalating global goods inflation.
Cryptocurrency markets have not been immune to recent volatility. Bitcoin's sharp decline below $96,000 has triggered widespread liquidations, creating turbulence across digital asset exchanges. The repercussions extend to other cryptocurrencies, including Binance Coin, which has seen its value decrease substantially in a brief period.