Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.

The vast majority of retail client accounts lose money when trading CFDs.

You should consider whether you can afford to take the high risk of losing your money.

Important Notice - Fraud awareness
Important Notice - Scam alert
The vast majority of retail client accounts lose money when trading CFDs.
Important Notice - Fraud awareness
Important Notice - Scam alert
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail client accounts lose money when trading CFDs. You should consider whether you can afford to take the high risk of losing your money.
Important Notice - Fraud awareness
Important Notice - Scam alert
The vast majority of retail investor accounts lose money when trading CFDs / Spread betting with this provider.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail investor accounts lose money when trading CFDs / Spread betting with this provider. You should consider whether you understand how CFDs / Spread betting work and whether you can afford to take the high risk of losing your money.
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Bank of England Restarts QE for Pound to Regain Stability

It was a momentous day for the Pound sterling after the Bank of England announced it would restart its quantitative easing program.

The goal of the BoE is to deal with instability in the markets, particularly in the UK gilt bond market, which collapsed due to margin calls.

Daily GBPUSD Chart

gbpusd daily chart

We said in our articles recently that the Japanese yen could gain further as a safe haven against UK market turmoil. Despite this recent bounce, that may still be the case, and traders can play that volatility.

The central bank became the first bank to capitulate on its plans to proceed with quantitative tightening on Wednesday in what they billed as a "temporary and targeted" bond buying operation. Policymakers said there was a "material risk to UK financial stability" if the turmoil in the UK government bond market were to continue. The bank also raised the prospect of a "tightening of financing conditions and a reduction in the flow of credit to the real economy.”

According to the Financial Times, a "break" in the bond market was created after thousands of pension funds faced urgent demands for cash from investment managers to meet margin calls, which are deposits required for holding market instruments. Pension funds are generally large buyers of bonds, and the aggressive rate hike strategies adopted by global central banks in recent weeks have hit portfolios hard.

The BoE said the latest move was designed to restore order and said: "The Bank will carry out temporary purchases of long-dated UK government bonds from September 28." The purchases will be carried out on whatever scale is necessary to affect this outcome."

The bank’s Financial Policy Committee welcomed the "plans for temporary and targeted purchases in the gilt market on financial stability grounds at an urgent pace." The Bank of England added the action would be "strictly time-limited," but that may depend on the market's response over the next few weeks.

The UK Treasury, which created the mess with their latest bailout and tax cut moves, said that the Bank of England has "identified a risk from recent dysfunction in gilt markets". The Treasury blamed that on "significant volatility" in "global financial markets" but failed to accept blame for the unfunded policy moves of the last week.

"The Chancellor is committed to the Bank of England’s independence. The Government will continue to work closely with the Bank in support of its financial stability and inflation objectives”, the Treasury said.

Last Updated: 29/09/2022

This market commentary and analysis has been prepared for ATFX by a third party for general information purposes only. Any view expressed does not constitute a personal recommendation or solicitation to buy or sell as it does not take into account your personal circumstances or objectives, and should therefore not be interpreted as financial, investment or other advice, or relied upon as such. You should therefore seek independent advice before making any investment decisions. This information has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. We aim to establish and maintain and operate effective organisational and administrative arrangements with a view to taking all reasonable steps to prevent conflicts of interest from constituting or giving rise to a material risk of damage to the interests of our clients. The market data is derived from independent sources believed to be reliable, however we make no representation or warranty of its accuracy or completeness, and accept no responsibility for any consequence of its use by recipients. Reproduction of this information, in whole or in part, is not permitted.


 

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