British Pound/U.S. Dollar and Bond Yields
Notice Exhibit 6.7, the monthly chart of the British pound/U.S. dollar and notice the exact directional movements to the euro/U.S. dollar. The difference is the British pound/U.S. dollar moved farther and faster up, yet its fall was greater. This is typical of this relationship, as the British pound/U.S. dollar always has and probably always will out pace the euro/U.S. dollar in up trends and down trends. Why?
Recall repurchase agreements and the mention of the corridor of rates. The euro is locked into a EURIBOR, EONIA, EURONIA, deposit rate, Minimum Bid Rate for Refinancing Facility and rates in the Marginal Lending Facility. See Exhibits 6.8 and 6.9 from the Bank of Japan's (BOJ) annual report of important ...
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