Sterling crisis averted by BoE intervention

Trade in the pound has remained highly volatile over the past couple of weeks, rebounding from a record low against the US dollar following a timely bond market intervention from the Bank of England (BoE).

During this period we have seen GBP/EUR rebound from 1.08 to 1.14, while EUR/GBP retreated from 0.91 to 0.87.

Meanwhile, GBP/USD rallied from a record low of 1.04 to around 1.10, while EUR/USD ticked up from 0.96 to 0.97.

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What’s been happening?

After crashing in the last week of September, the pound has since rallied. An intervention from the BoE into the UK bond market, in addition to a U-turn from the government regarding tax cuts for the highest earners helping to underpin Sterling’s recovery. 

The euro, meanwhile, has fluctuated in recent weeks. hawkish signals from the European Central Bank (ECB) being countered by European energy uncertainty and Ukraine concerns.

At the same time, an improving market mood saw the US dollar retreat from its best levels. Although a stronger-than-expected US payroll print has seen the ‘greenback’ begin to claw back these losses.

What do you need to look out for?

UK fiscal and political uncertainty may remain elevated in the next couple of weeks, potentially leading volatility in the pound to remain elevated.

Expectations for another 75bps rate hike from the ECB could bolster the euro, although a possible escalation of the war in Ukraine could limit the single currency’s upside potential.

Meanwhile, softening market risk appetite leaves the US dollar well positioned, Particularly if the upcoming US inflation figures beat expectations.

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1 thought on “Sterling crisis averted by BoE intervention”

  1. Thanks for your article. As a Brit I’m really struggling with the poor performance of the pound and hoping it picks up after Brexit is ironed out

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