Sterling slippery, stocks stalling as BoE boost fades
Asian share markets rose on Thursday after Britain’s central bank launched an emergency bond buying programme to stabilise a furious sell-off in gilts, though trade was skittish and sterling remained under pressure.
The Bank of England said it will buy as much as £5 billion ($5.4 billion) a day of long-dated government bonds until Oct. 14. It spent about a billion pounds on Wednesday and 30-year gilt yields fell 105 basis points (bps), the biggest drop ever according to Refinitiv records stretching back to 1992.
The move buoyed sterling and offered some salve to a fractious mood in markets, but by mid-afternoon in Tokyo the pound was struggling for support and down 1% at $1.0776.
Dollar Surges Higher, Pound Retreats as BOE Relief Doesn’t Last
The U.S. dollar resumed its seemingly relentless march higher in early European trading Thursday, while sterling slumped as the relief rally attached to the Bank of England’s intervention into the bond market dissipated.
At 03:10 ET (07:10 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, rose 0.8% to 113.438, rebounding close to its recent two-decade high of 114.653 after its worst session in more than two years.
The Bank of England announced an emergency bond-buying on Wednesday, attempting to shore up the gilt market which had slumped, along with the pound, after the new U.K. government announced substantial tax cuts, likely funding by hefty borrowing.
This will put pressure on the BoE to announce a substantial interest rate hike at its next meeting in early November, if it continues to rule out an emergency hike, in order to support the beleaguered pound.
Germany’s most populous state sees biggest inflation jump in decades
German inflation likely grew significantly in September based on initial data from its most populous state, which saw the biggest jump since the early 1950s, according to its statistics office.
The state of North Rhine Westphalia saw inflation rise 10.1% year-on-year in September, mainly due to higher costs for goods and services after a cheaper transport ticket and fuel tax cut expired at the end of August.
The federal statistics office will publish a flash estimate for nationwide September inflation later Thursday.
Analysts polled by Reuters expect EU-harmonized consumer prices (HICP) to increase by 10% on the year in September.
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