By George Saravelos, chief FX strategist at Deutsche Bank
Once again the market is worried about a twin deficit crash in the UK. We were one of the first to warn about a combined gilt/currency crash ahead of the 2022 crisis, so is there a reason to be concerned again now? There is good news and bad news.
The good news is that the 2022 crisis was self-inflicted. It was a UK-driven policy shock. The easiest way to see this is that gilt moves back then completely decoupled from other markets and idiosyncratically sold off. This time round, all gilts are doing is mirroring US treasuries. The most straightforward way to demonstrate this is that the 10-year UST - Gilt spread is moving sideways and is exactly where it was six months ago.
