BoE’s FPC: Some risky asset valuations appear stretched

Dhwani Mehta FXStreet

Following a quarterly meeting, the Bank of England’s (BoE) Financial Policy Committee (FPC) said on Tuesday, “some risky asset valuations appear "stretched", such as US tech stocks and Dollar high-yield and investment-grade bonds.”

Additional takeaways

Overall risk environment is challenging and near-term global growth prospects are subdued.

Will closely monitor developments in Hong Kong and mainland Chinese property markets for UK bank spillover.

Household debt servicing ratios rising but not expected to reach pre-financial crisis peak.

35-year term residential mortgages have seen a "notable increase".

No significant net sales by buy-to-let landlords, but higher costs passed on to renters.

UK banking system remains resilient, even if economic and financial conditions turn substantially worse.

FPC maintains counter-cyclical capital buffer (CCYB) rate at 2%.

Some FPC members suggested raising CCYB to build resilience, case for lowering CCYB also discussed.

FPC stands ready to vary CCYB in either direction as risk environment develops.

Market reaction

Amidst risk recovery, GBP/USD is building on its renewed upside to trade near 1.2272, up 0.30% 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.

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