GBP is experiencing elevated volatility this morning as media reports boost uncertainty over future of Bank of England bond-buying schemes. GBP saw some weakness yesterday in the evening after Bank of England Governor Bailey said that he remains committed to ending a new bond-buying scheme this Friday as planned. However, Financial Times came out with a piece this morning saying that Bailey has privately told bankers that QE is likely to be extended until month's end. This has triggered a jump in the GBP market. However, Bank of England rejected FT report and issued a statement this morning saying that bond purchases will end as planned.
Turmoil on the UK bond market remains and there is a risk of a panic sale of UK bonds should BoE withdraw its support. Extension until the end of October would seem reasonable as Truss' government brought forward the announcement of a medium-term budget, which is now scheduled to be presented at the end of this month. Let us recall that it was the announcement of new fiscal plan, including massive tax cuts without financing, that triggered a sell-off on the UK bond market. Medium-term budget will outline the source of financing and it may ease concerns of market participants. Speaking of fiscal plans, GBP received another boost this morning on media chatter saying that Prime Minister Truss may decide to scrap even more of the announced tax cut ideas.
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Open account Try demo Download mobile app Download mobile appA look at GBPUSD at H1 interval shows that the pair is currently trying to break above the 50-period moving average (green line) and the resistance zone marked with 38.2% retracement of the upward move launched on September 26, 2022. However, even a break above those would not shift a bearish technical bias in the market. A break above 1.1105 would be required as this is where the upper limit of a local market geometry can be found.
Source: xStation5
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