BOE’s Cunliffe: Closely monitoring LDI funds to ensure resilience

Dhwani Mehta FXStreet

The Bank of England (BOE) Deputy Governor Jon Cunliffe said in a letter published on Thursday, the bank and FPC continue to monitor market conditions and channels through which vulnerabilities could amplify future market stresses.

Further quotes

The FPC will publish its next financial policy statement and record on Oct. 12.

BOE, TPR and the FCA closely monitor the progress of LDI funds as they take action to put their positions on a sustainable footing for whatever level of asset prices prevails.

Want to ensure LDI funds are better prepared for future stresses given the current volatility in the market.

It is important that lessons are learned and appropriate levels of resilience are ensured.

The MPC will make a full assessment of recent macroeconomic developments at its next scheduled monetary policy meeting on 3 November.

BOE’s operations in gilt market are not intended to create central bank money on a lasting basis, nor are they designed to cap or control long-term interest rates.

They should not shift the underlying monetary trends in the economy, which ultimately pin down developments in inflation, and so they are not monetary policy operations.

The FPC recommended that the bank take action, and welcomed the bank’s plans for temporary and targeted purchases in the gilt market on financial stability grounds at an urgent pace.

Market reaction

GBP/USD is feeling the heat from the BOE commentary, as it drops back below 1.1300, down 0.34% on the day.

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

EUR/USD looks to regain the 200-day SMA

EUR/USD regains some balance and trade just above 1.1600 the figure ahead of the opening bell in Asia. The pair initially dipped to the 1.1530 zone for the first time since November, always following the stronger US Dollar and the marked flight-to-safety in the context of the ongoing Middle East crisis

GBP/USD attacks 1.3300, refreshing three-month lows

GBP/USD is deep in the red near 1.3300, accelerating its downside to renew three-month lows in European trading on Tuesday. The ongoing escalation in the Iran war, combined with rising Oil prices, weighs negatively on the higher-yielding Pound Sterling as the US Dollar capitalizes on increased haven demand.

Gold bounces off lows, back above $5,100

Gold remains on the defensive, eroding part of the recent multi-day advance and managing to trade back above the $5,100 mark per troy ounce on Tuesday. The precious metal initially dropped just below the critical $5,000 threshold on the back of the persistent strength of the Greenback, higher US Treasury yields across the curve and investors' repricing of Fed rate cuts.