From the FT:
The strength of the UK economy is drawing covetous and occasionally envious glances from the eurozone as investors from around the world size up the opportunity presented by Britain’s recovery.
The UK economic revival has taken almost everyone by surprise, confounding domestic and international forecasting groups. Having failed to predict the turn, most explain the sudden resurgence as a rebounding of confidence linked to the removal of previous impediments to growth, such as weak banks and fears of a eurozone crisis.
Some economists believe the UK will be the world’s fastest growing developed economy over the next five years.
In a recent post Scott Sumner writes:
Effective monetary stimulus will lead to higher long-term rates. The key is to make sure those long-term rate increases reflect the growth impact of policy, and not monetary tightening. That’s why you focus on other asset markets like equities and forex rates. If equity prices are falling and the currency is strengthening, then the higher rates may reflect tighter money.
What are these market signals saying about Britain´s growth prospects? Unfortunately, equity prices are falling and the currency is strengthening!
In Japan, the opposite is happening:
From Lars Christensen:
Talk of further monetary stimulus from the Bank of Japan helped push the yen to a six-month low and lifted the Nikkei to a six-month high on Tuesday, and the move in Japanese assets may have further to run, analysts say.
Comments made by Bank of Japan (BOJ) governor Haruhiko Kuroda on Monday fueled speculation of further easing, after he told participants at a conference “we are ready to adjust monetary policy without hesitation if risks materialize.”
What are the markets signaling?