Investors seem sceptical that the recent improvement in the UK economy will last. In contrast to the rises seen in the US and Germany, equity prices in the UK have held steady. And while gilt yields have risen, this seems to have reflected a modest easing in safe-haven demand as the euro-zone’s debt crisis has eased, rather than building hopes of an economic recovery in the UK. Note too that interest rate markets have continued to price in a decent chance of a cut in Bank Rate in the coming months.
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