The review describes developments in various markets, mainly in the period November 1977 to January 1978. The change in exchange market intervention policy at the end of October meant that financial developments during these three months were very different from those of the previous three.
In the money market, with the lessening of external pressures and with monetary expansion running slightly above the target range, interest rates rose in November after falling steeply earlier in the year; they fell back a little in January. In the gilt-edged market, prices and turnover fell during the period; nevertheless, in the December quarter as a whole the authorities sold over £2,000 million net of stock. Equity prices and turnover also fell in November to January. In the foreign exchange market, sterling's effective exchange rate index rose from 64.6 to 66.5 during the period; the US dollar was weak.
The underlying growth of the London euro-currency market was probably rather slower in the fourth quarter than in the previous three months. The oil-exporting countries' revenues and cash surplus were both virtually unchanged in the quarter. The commodity markets were generally quiet in November to January.
The final section of the review describes movements in the investment currency premium in 1977 as a whole. The effective premium fell from 44% at the beginning of 1977 to 32% at the end of the year.
Published on
01 March 1978
Financial review