Latest News

Sterling rallies for 3rd day after BoE bond buys; U.S. dollar down

Sterling rallies for 3rd day after BoE bond buys; U.S. dollar down By Reuters

Breaking News

‘;

Economy 23 minutes ago (Sep 29, 2022 21:11)

© Reuters. FILE PHOTO: Pound and U.S. dollar banknotes are seen in this illustration taken January 6, 2020. REUTERS/Dado Ruvic/Illustration/File Photo

By Gertrude Chavez-Dreyfuss

NEW YORK (Reuters) – Sterling rose sharply in volatile trading on Thursday, rallying from record lows hit on Monday, after the Bank of England conducted a second day of bond buying to stabilize financial markets.

The pound posted its largest one-day percentage gain since March 2020 and last traded at $1.1076, up 1.8%. After hitting an all-time trough of $1.0327 three days ago, sterling has rallied more than 7% against the dollar.

The recovery in the British currency was due in part to the BoE’s action. On Thursday, the BoE bought 1.415 billion pounds ($1.55 billion) of British government bonds with maturities of more than 20 years, the second day of a multi-billion pound program designed to stabilize the market.

“The BoE is showing creativity and willingness to respond to crazy markets,” said Greg Anderson, global head of foreign exchange strategy, at BMO Capital Markets in New York.

But he noted that sterling gains as a result of the BoE’s moves are not sustainable.

“Any time a central bank is undertaking a temporary intervention program, the market will certainly test this and see whether the central banks is going to keep doing this or not. But I wouldn’t forecast that the pound’s parity with the dollar is going to break.”

Anderson added that he will be a seller of the pound at $1.10, with the likelihood of the currency going back down to $1.05.

Sterling initially fell on Thursday as Prime Minister Liz Truss defended her government tax-cutting budget.

The dollar, on the other hand, fell against a basket of major currencies. It was last down 0.4% at 112.148.

The euro rose 0.7% against the dollar to $0.9804.

Data showed euro zone economic sentiment fell sharply and by more than expected in September as confidence dropped among companies and consumers, who are also downbeat about price trends in the coming months.

The big focus, however, was German inflation, which jumped to 10.9% this month, far beyond expectations for a reading of 10%. That suggests the figure for the wider 19-country euro zone, due on Friday, is also likely to exceed the predicted 9.6%, reinforcing the case for another 75 basis-point increase at the next European Central Bank policy meeting.

That said, some analysts think the ECB’s potential action is likely just a short-term boost for the euro.

“Rate increases can support a currency… But the process of inflation is never good for a currency, especially if inflation hasn’t been tamed properly by the central bank,” said Stephen Gallo, European head of FX Strategy at BMO in London.

“I would not want to own the euro simply because the ECB is hiking. I would want to own the euro when the U.S. dollar peaks, and when it becomes clear that euro zone inflation is moderating and when it becomes clear that the bloc is clear of a massive recession.”

In other currency pairs, the dollar rose 0.2% to 144.355 yen.

Japan intervened last week to shore up a struggling yen. Finance Minister Shunichi Suzuki said on Thursday Japan’s recent currency intervention was conducted to rectify market distortion caused by speculative currency moves. He signalled his readiness to intervene again if speculation persists.

Elsewhere, China’s offshore yuan bounced about 1% to 7.0894 per dollar after Reuters reported state banks have been told to stock up for yuan intervention.

The risk-sensitive Australian dollar sank 0.4% to US$0.6494. A new measure of consumer prices showed annual inflation eased a bit from August to July, offering hope that cost pressures might be close to a peak. [AUD/]

Sterling rallies for 3rd day after BoE bond buys; U.S. dollar down

Rebel UK Conservative lawmakers prepare to block scrapping of top income tax rate -reportBy Reuters – Sep 29, 2022

LONDON (Reuters) – Rebel British lawmakers from Prime Minister Liz Truss’s Conservative Party are preparing to vote down sections of a finance bill to block the abolition of the…

Sterling climbs as dollar slips in wake of Bank of England interventionBy Reuters – Sep 29, 2022

By Harry Robertson LONDON (Reuters) -The pound reversed losses and climbed more than 1% on Thursday as the dollar slipped and investors analysed the Bank of England’s dramatic…

Pound and euro need to fall further to reach “fair value” – IIFBy Reuters – Sep 29, 2022

LONDON (Reuters) – Britain’s pound is still 18% above its “fair value” and the euro 11.6% above its fair value despite the sharp falls seen by both currencies this year, the…

Our Apps



Terms And Conditions
Privacy Policy
Risk Warning

© 2007-2022 Fusion Media Limited. All Rights Reserved.

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.

You may also like

Leave a reply

Your email address will not be published. Required fields are marked *

More in Latest News