GBP/USD: Sterling to rally if BoE ends emergency programme of gilt purchases – Commerzbank

Sterling has been able to retrace its losses recorded following the budget debacle. Bank of England’s (BoE) decision on the end of the emergency programme of gilt purchases is key to the future of the currency, economists at Commerzbank report.

BoE not made any gilt purchases, a positive sign for sterling

“Yesterday, the BoE even announced that it had not made any purchases as part of its emergency programme initiated as a result of the sell-off last week. By doing so it seems to want to signal that it wants to intervene as little as possible to calm the gilt market. This, for now, is a positive sign for sterling.”

“What is going to be even more interesting is whether the central bankers really will end the programme on 14th October as announced. If the BoE will end the purchases as planned sterling might benefit significantly, as the bank would hereby signal that it is sticking to its restrictive path. If, on the other hand, it was to continue the programme for fear of a renewed rise in long-term market rates sterling exchange rates are likely to go south again.”