Fall in pound after Bank of England warns market support will end in coming days

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That pound fell again after the governor of the Bank of England warned that his emergency aid package for markets would expire on Friday.

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Earlier, amid the ongoing market turmoil in the wake of Chancellor Quasi Quarteng’s mini-budget, the bank intervened for the second time in several days to prevent a “fire sale” of pension fund assets.

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But speaking in Washington later on Tuesday evening, Governor Andrew Bailey warned there could be no further extension beyond the end of the week.

Part of the essence of financial stability intervention is that it is apparently temporary.

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“My message to the (pension) fund – you have three days left. You have to get this done.

“Part of the essence of the financial stability intervention is that it is clearly temporary.”

But that message was contradicted by a report in the Financial Times on Wednesday, in which people spoke about discussions with the Bank of England that officials there have indicated privately that the emergency bond-buying program may in fact be extended. could.

Following Mr Bailey’s remarks, sterling fell more than a percentage point against the dollar to its lowest rate since September 29.

The pound was lower against both the dollar and the euro on Wednesday morning, amid continuing unease among financial traders.

Sterling fell 0.85% to 1.099 against the dollar. The pound came after reaching 1.1180 on Tuesday, but fell sharply after the governor’s warning for pension funds.

Meanwhile, according to experts at CMC Markets UK, the FTSE 100 is expected to move marginally lower when trading opens.

Earlier, the Pension and Lifetime Savings Association, which represents the industry, welcomed the bank’s latest intervention, but warned against ending it “too soon”.

In a statement, it suggested it should be extended until at least 31 October – when Mr Quarteng is due to explain how he intends to get public finances back on track after his £43bn tax giveaway.

Alternatively, it said “additional measures should be taken to manage market volatility”.

The bank said it was acting as a sell-off in the UK government bond market, which poses “a significant risk to the financial stability of the UK”, despite efforts by the bank and the government to continue the long run on Monday. Over time the yield on gilt increased once again. Address investor concerns.

Threadneedle Street said it will now expand the scope of its bond-buying program to include the purchase of index-linked gilts – a type of UK government bond that tracks inflation.

On Monday, it raised its daily bond-buying limit to £10 billion, while Mr Quarteng pushed forward his new financial plan and independent economic forecasts to October 31 in an effort to calm turbulent markets.

The bank said: “This week has seen another significant revaluation of UK government debt, particularly index-linked gilts.

“This market laxity, and the potential for self-reinforcing ‘fire sale’ dynamics, pose a significant risk to the financial stability of the UK.”

It added that its latest efforts will “act as another backstop to restore orderly market conditions”.

Credit: www.standard.co.uk /

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