Financial markets appear to have taken the recent signs that the downturn in the UK economy is past its absolute worst at face value, with equities, bond yields and the sterling exchange rate all rising to at least six month highs. But while the movements seen so far appear justified by the improvement in the economic data, we suspect that it will take more convincing signs that the economy has returned to a path of solid and sustained expansion for equities and bond yields to rise much further. This point could still be some way off.
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