Pound comes back under pressure as details emerge of scale of Bank of England debt intervention
The pound was again under pressure after details emerged of the extent of the Bank of England’s intervention in the UK government debt market.
Sterling traded just below $1.08, down 0.8% at $1.0797, amid a broader trend for a stronger dollar, while against the euro it weakened 0.2%, with a unit of the common currency worth £ 0.8954.
The BoE expects to spend a total of £65bn, with £5bn of purchases each day until October 14, to keep gold yields low and support the price of UK government bonds as pension funds sell them to meet their financial obligations.
Mark Carney, the former governor of the Bank of England, said the UK’s financial system had taken a “big hit” and that the government’s “piecemeal budget” was responsible for “undermining” the country’s economic and financial institutions. Speaking on BBC Radio Four’s Today programme, he also said the measures announced by Chancellor Kwasi Kwarteng were “working at some cross-purposes with the Bank in terms of short-term support for the economy”.
Early talk points to further falls for the FTSE 100 as investors consider the scale of the Bank of England’s intervention
London’s FTSE 100 was expected to be lower in open trade as investors weighed the details of the Bank of England’s intervention in UK government bond markets.
The BoE will spend a total of £65bn, with £5bn of spending each day until 14 October. That will support the gilt market, keeping yields low and raising the price of debt that many pension funds have to sell to meet their financial obligations after the market turmoil that followed the government’s minibudget on Friday.
According to initial calls from IG, the FTSE 100 was down 0.4% at 6,979 points, in line with declines in continental European stock indexes.