The pound was sold by panic!Can the Bank of England speak urgently, can the financial market appease the financial market?

27.09.2022

Number of this text: 1906, reading time for about 3 minutes

Introduction: Many market participants believe that the fluctuation of the British exchange rate may lead to advance operation of the Bank of England.

Author | First Financial Fan Zhijing

In the early morning of Monday, the British/US dollar exchange rate fell below the 1.04 mark, a record low. Investors were concerned about the British government's largest tax reduction policy since the beginning of the 1970s.

Local time on Monday afternoon, the Bank of England issued an emergency statement: "In view of the major re -pricing of financial assets, Bank of England is closely monitoring the development of the financial market." The pound then rose steadily and approached the 1.09 mark.

With the refreshing historical level of the pound, the market began to speculate that the Bank of England may be forced to further tighten the monetary policy to support the British exchange rate. In the British Central Bank's interest rate futures market, there are even funds that Britain will even pay a significant interest rate hike at the next interest rate conference.

Panic selling in the pound

British Finance Minister Kwasi Kwarteng announced the "mini" budget bill last Friday, including cutting national insurance, canceling the company's tax plan, and reducing the stamp duty of buying real estate, which caused concerns about the further expansion of British debt and the upgrading of inflation upgrades. Essence Affected by this, the British pound fell over 4%in one -day, hitting the third difference since the Black Wednesday of 1992.

The tide of selling continued to this Monday. As the Asian market broke through the 114 integer mark, the British/US dollar fell to a record low of $ 1.0327. The panic also spread to British Treasury bonds. The yield on the benchmark 10 -year British bonds has risen significantly and exceeded 4%. For the first time since 2010, investors worry that the government's economic plan will make British finances reach the limit. "Doctor Dr." Nouriel Rlesbini warned that the new policy of the new Prime Minister Liz Truss will embark on the road of helping Britain for help from the International Monetary Fund (IMF).

The pound is facing tremendous pressure (Source: British Caiqing)

The British Institute of Finance (IFS) believes that the British government's tax reduction boosting plan is an economic gambling, which will take British debt on a "unsustainable" path, which will increase public debt 100 billion pounds each year. The combination of Tillas's increase in expenditure and tax cuts will lead to national debt swelling. IFS warned that Britain's tax cuts were the biggest since 1972. The tax cuts in 1972 ended with catastrophic results.

The British Ministry of Finance issued a statement on Monday afternoon saying that the government will announce the mid -term fiscal plan on November 23. The Ministry of Finance stated that the Office for Budget Responsibility required the Office of Independence to formulate a complete economic forecast while formulating the plan.

Quoton also expressed the market fluctuations caused by the New Deal on the same day. He said: "As the Minister of Finance, I don't comment on the market trend. I pay attention to economic growth and ensure that Britain is an attractive investment place." He further said, "I believe that the central bank is responding (inflation)."

British Central Bank emergency voice

British President Belly said in a statement that he welcomes the British government to commit sustainable economic growth and play the role of the budget responsibility office when evaluating the economic and public fiscal prospects.

The Bank of England issued a statement (Source: Central Bank website)

Bailey said that the Central Bank Monetary Policy Commission (MPC) clearly stated that it will comprehensively evaluate the impact of government announcements and the depreciation of British pounds on demand and inflation at the next meeting, and take corresponding actions. "The Monetary Policy Committee will change interest rates without hesitation, so that inflation can sustainly restore 2%of the target in the medium term."

Last week, the Bank of England raised policy interest rates from 1.75%to 2.25%, and stated that although the economy may have been in a slight decline, it will continue to respond to inflation in the future. In response to the energy price plan of British Prime Minister Tras, the Bank of England has reduced its prediction of British inflation from more than 13%to slightly lower than 11%, but warned that the policy may cause long -term price pressure.

Mike Riddell, a senior investment group manager of Allianz Global Investors, said: "The Bank of England is in a very difficult situation. If they do not respond, they may collapse again. It looks like an emerging market in order to defend the currency in order to defend the currency. Therefore, if they do this, they will be condemned. If they do not do this, they will be condemned. "

Jeff Kleintop, the chief global investment strategist of Jiaxin Financial Finance, believes that British tax cuts may inject more funds into the economy, which may create more demand and further exacerbate inflation. He said that when investors worry that the central bank's tightening monetary policy will increase the risk of global economic recession, this may promote the Bank of England to raise interest rates further.

Many market participants believe that the British exchange rate fluctuations may lead to advance operations of the British Bank of England. AVATRADE market analyst Naeem Aslam issued a report saying that Britain can intervene in the market by increasing interest rates by 100 basis points. "Investors are highly looking forward to the unexpected announcement of the central bank, and traders should be cautious about this." In history, the Bank of Britain had similar actions. For example, when Britain decided to withdraw from the European exchange rate mechanism (ERM) 30 years ago, he had once one at one time. Increase interest rates to 15%. However, the current severe economic situation has made the internal policy of the Monetary Policy Commission that has obvious differences in the policy of dealing with inflation. Data show that Britain's retail sales in August decreased by 1.6%month -on -month, the largest decline since December 2021. The retail sales of all major retail industries have fallen for the first time since July 2021. Commercial activities continued to cool down. The British Comprehensive Procurement Manager Index (PMI) in September was 48.4, which was once again less than 50.

Britain will announce the final value of the GDP (GDP) in the second quarter this Friday. If the value is repaired, it will mean that the British economy will fall into a technical decline. The central bank will face greater policy pressure.

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