- The Bank of England buys gilts to stabilize the bond market.
- The pound strengthens after the initial impact of the BOE announcement.
- EUR/GBP fails to hold steady above 0.9000.
The EUR/GBP hovers around 0.8940, almost flat on the day, after a few moments of extreme volatility following the surprise announcement from the Bank of England. The cross bottomed at 0.8838, a three-day low, and then jumped to 0.9066, before pulling back. GBP/USD moved from 1.0535 to levels above 1.0900.
The Bank of England announced that it will sell long-term gilts and delayed the start of sales. The collapse of British bonds forced the BoE to act to avoid further tensions in the financial markets. The BOE said it bought 1.025 billion pounds of gilts on Wednesday.
The decision was positive for equity markets and also pushed bond yields around the world down. However, the situation in the UK remains complex. The collapse of British bonds and the rapid depreciation of the pound also caused political instability in the new government of Prime Minister Liz Truss. Her tax cut plan is being criticized.
The markets continue to digest the BOE announcement. The current lull is likely to be short-lived and EUR/GBP will continue to search for the next level of balance. At the moment, that zone seems to be below 0.9000. A close above could open the doors to more gains.
Technical levels
Source: Fx Street
With 6 years of experience, I bring to the table captivating and informative writing in the world news category. My expertise covers a range of industries, including tourism, technology, forex and stocks. From brief social media posts to in-depth articles, I am dedicated to creating compelling content for various platforms.
