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Why Asian Stocks Are Rising While Sterling Falls

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1. Strong US Tech Earnings & Global Risk Appetite

  • Corporate earnings from major US tech companies like Microsoft and Meta exceeded expectations, boosting investor confidence globally and lifting futures in S&P 500 and Nasdaq. This spillover helped support Asian markets, particularly in tech-heavy regions like Taiwan and South Korea ReutersThe Economic Times.

  • Trade optimism, especially surrounding pending deals between the U.S. and countries like South Korea, is also improving sentiment and sustaining demand for equities in Asia The Economic TimesThe Times of India.

2. Federal Reserve Rate Expectations

  • Markets increasingly expect the Federal Reserve will cut interest rates later this year, easing global borrowing costs and fueling risk-on sentiment. That has translated into buying pressure in Asian stocks even as the dollar holds near multimonth highs The Economic TimesReuters.

📉 Why Sterling Is Falling

1. Weak UK Economic Data

  • The UK economy contracted by 0.1% in both April and May, with declines in construction and manufacturing raising alarm bells. Retail sales have also been below expectations, reinforcing recession fears Reuters+1thetimes.co.uk+1.

  • Labor market troubles, with increasing job cuts and sluggish business activity, have heightened pressure on the Bank of England (BoE) to cut interest rates theguardian.com+2Reuters+2Reuters+2.

2. Diverging Monetary Policy Outlook

  • While the European Central Bank (ECB) appears done with rate cuts and bond yields in the eurozone are rising, the BoE is lagging. Markets expect multiple rate cuts from the BoE later this year, making sterling comparatively weak Reuters.

3. Fiscal Credibility Concerns & UK Political Risk

  • Investors are unsettled by growing fiscal risks in the UK government. Supply-side shocks, political uncertainty, and doubts about the government’s ability to meet fiscal rules—particularly after a £31 billion shortfall—are hitting sterling sentiment thetimes.co.uktheguardian.com.

4. Resurgent US Dollar

  • As global trade tensions ease and optimism around a U.S.–EU deal rises, the dollar is gaining broad strength. That makes it more difficult for sterling to hold value, especially as investors shift toward safe-haven flows into U.S. assets uk.investing.commoneycorp.com.

✅ Summary Table

Factor Asian Stocks Rising Sterling Falling
Earnings & Risk Sentiment Strong US tech earnings boost confidence in risk assets —
Fed Interest Rate Expectations Growing bets on rate cuts lift equities —
Economic Data — UK GDP contraction, weak retail & labor data
Policy Divergence — ECB done cutting; BoE expected to cut
Fiscal & Political Risk — Doubts about UK government’s fiscal credibility
Dollar Strength — Strong USD makes GBP cheaper

🔍 The Big Picture

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