The Bank of England (BoE) has unexpectedly announced its policy to deal with a dysfunctional gilt market. In the opinion of economists at TD Securities, the pound sterling may gain some short-term stability, although it will probably be temporary.
Consolidation is likely to be superficial and temporary
“The Bank of England has announced the start of a temporary Quantitative Easing (QE) program targeting long duration Gilts, and has delayed the start of its Gilts sale program until the end of October. The Monetary Policy Committee will have to take this sharp change into account when setting monetary policy in November.”
“Stability around 1.07 for cable would be a winbut ultimately tactical, with 1.0520/1.0350 key support and 1.0931 resistance key above.”
Source: Fx Street
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