The Bank of England is no longer going to save the financial market
October 14, 2022 11:24 am
All the attention today is on the British pound, which could repeat the path of the end of September this year, when daily drops were 400-500 points. Yes, such a gloomy scenario is no longer worth counting on, but the chances of another collapse of the national currency of Great Britain are great again.
Yesterday, Andrew Bailey arrived at a meeting in Washington after the British government was refused a further extension of the emergency bond purchase program conducted by the Bank of England to save the financial market. When asked by reporters whether the government’s rejection of plans for a large-scale tax cut package would end the turmoil in the UK financial markets, the governor of the Bank of England declined to comment but smiled broadly.
However, the fact that the Chancellor of the Exchequer, Kwasi Kwarteng, has returned to London indicates that the Bank of England no longer intends to make concessions to the Ministry of Finance. Many experts said they did not remember the last time the British Chancellor left an early meeting of the International Monetary Fund. This again confirms the complexity of the situation in which Kvarteng is currently drawing up the annual budget.
The 63-year-old governor of the Bank of England, Andrew Bailey, said that the regulator would complete an emergency credit line for 65 billion pounds as predicted this Friday. Traders expected its extension and expect it to continue since there is no serious closure of short positions in the British pound yet.
The British Finance Minister warned that if Bailey does not help the government, it will be on his conscience since the financial markets will be paralyzed again next week. Many analysts also predicted that Bailey would be forced to change course, which, as a result, would deal a serious blow to his credibility.
Despite Kwarteng’s bravado, officials formed a protective barrier around Bailey at the IMF meeting, squarely placing the blame for the market turmoil on the Chancellor and British Prime Minister Liz Truss. IMF Managing Director Kristalina Georgieva praised the Bank of England’s support for bond purchases, saying that the actions were appropriate and timely, eliminating the risk to financial stability.
She also stressed the need for coherence in the new policy, veiling criticism of the Kvarteng plan for tax cuts of 45 billion pounds, which was announced three weeks ago and the government abandoned.
Against this background, the pound continues to recover, but its further direction has not yet been determined. Buyers will focus on protecting the 1.1260 support and the 1.1350 resistance, which limits the upward potential of the pair. Only a breakthrough of 1.1350 will open prospects for recovery to the area of 1.1420, after which it will be possible to talk about a sharper jerk of the pound up to the area of 1.1480 – the maximum of this month. It is possible to talk about the return of pressure on the trading instrument after the bears take control of 1.1260, which can happen quite quickly in the case of strong statistics in the United States. This will blow the bulls’ positions and completely negate the prospects of the bull market observed since September 28. A breakout of 1.1260 will push GBPUSD back to 1.1180 and 1.1100.
As for the technical picture of EURUSD, the bears retreated a little, and the bulls reached the resistance of 0.9800. Before the important data on retail sales in the US, the upward correction of the pair may continue. To continue the growth, it is necessary to break above 0.9800, which will take the trading instrument to 0.9840 and 0.9880. However, the upward prospects will depend entirely on the US data. A break of 0.9755 will put pressure on the trading instrument and push the euro to a minimum of 0.9713, which will only worsen the situation of buyers of risky assets in the market. Having missed 0.9713, it will be possible to wait for the update of the lows in the area of 0.9680 and 0.9640.
The material has been provided by InstaForex Company – www.instaforex.com
All the attention today is on the British pound, which could repeat the path of the end of September this year, when daily drops were 400-500 points. Yes, such a gloomy scenario is no longer worth counting on, but the chances of another collapse of the national currency of Great Britain are great again.
Yesterday, Andrew Bailey arrived at a meeting in Washington after the British government was refused a further extension of the emergency bond purchase program conducted by the Bank of England to save the financial market. When asked by reporters whether the government’s rejection of plans for a large-scale tax cut package would end the turmoil in the UK financial markets, the governor of the Bank of England declined to comment but smiled broadly.
However, the fact that the Chancellor of the Exchequer, Kwasi Kwarteng, has returned to London indicates that the Bank of England no longer intends to make concessions to the Ministry of Finance. Many experts said they did not remember the last time the British Chancellor left an early meeting of the International Monetary Fund. This again confirms the complexity of the situation in which Kvarteng is currently drawing up the annual budget.
The 63-year-old governor of the Bank of England, Andrew Bailey, said that the regulator would complete an emergency credit line for 65 billion pounds as predicted this Friday. Traders expected its extension and expect it to continue since there is no serious closure of short positions in the British pound yet.
The British Finance Minister warned that if Bailey does not help the government, it will be on his conscience since the financial markets will be paralyzed again next week. Many analysts also predicted that Bailey would be forced to change course, which, as a result, would deal a serious blow to his credibility.
Despite Kwarteng’s bravado, officials formed a protective barrier around Bailey at the IMF meeting, squarely placing the blame for the market turmoil on the Chancellor and British Prime Minister Liz Truss. IMF Managing Director Kristalina Georgieva praised the Bank of England’s support for bond purchases, saying that the actions were appropriate and timely, eliminating the risk to financial stability.
She also stressed the need for coherence in the new policy, veiling criticism of the Kvarteng plan for tax cuts of 45 billion pounds, which was announced three weeks ago and the government abandoned.
Against this background, the pound continues to recover, but its further direction has not yet been determined. Buyers will focus on protecting the 1.1260 support and the 1.1350 resistance, which limits the upward potential of the pair. Only a breakthrough of 1.1350 will open prospects for recovery to the area of 1.1420, after which it will be possible to talk about a sharper jerk of the pound up to the area of 1.1480 – the maximum of this month. It is possible to talk about the return of pressure on the trading instrument after the bears take control of 1.1260, which can happen quite quickly in the case of strong statistics in the United States. This will blow the bulls’ positions and completely negate the prospects of the bull market observed since September 28. A breakout of 1.1260 will push GBPUSD back to 1.1180 and 1.1100.
As for the technical picture of EURUSD, the bears retreated a little, and the bulls reached the resistance of 0.9800. Before the important data on retail sales in the US, the upward correction of the pair may continue. To continue the growth, it is necessary to break above 0.9800, which will take the trading instrument to 0.9840 and 0.9880. However, the upward prospects will depend entirely on the US data. A break of 0.9755 will put pressure on the trading instrument and push the euro to a minimum of 0.9713, which will only worsen the situation of buyers of risky assets in the market. Having missed 0.9713, it will be possible to wait for the update of the lows in the area of 0.9680 and 0.9640.
The material has been provided by InstaForex Company – www.instaforex.com
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