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Equities diverge from monetary base

Posted on Friday, October 8, 2010 at 09:39AM by Registered CommenterSimon Ward | CommentsPost a Comment

The G7 monetary base – currency in circulation plus bank reserves – contracted further last week, as a large fall in the Eurozone offset a rise in Japan. The base is at its lowest level since December – see chart.

Markets have rallied on hopes of a large QE2 liquidity injection and may correct if this is not delivered soon and on the expected scale.

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