The main points in financial markets in the three months to mid-May:
- There were severe cash shortages in the money markets earlier in the period, but these conditions subsequently eased, largely because of the temporary effects of the Civil Service dispute.
- The authorities maintained the momentum of the funding programme in the first three months of the new target period for sterling M3, with heavy sales of gilt-edged stocks (including the first index-linked stock) and national savings.
- A number of other domestic capital markets showed greater activity. There was a sharp rise-later partially reversed-in equity prices.
- In the foreign exchange market, currencies responded mainly to developments in interest rates. Sterling weakened against a generally stronger dollar, but maintained its position against European currencies and in effective terms.