The pound and FTSE pared losses after the bank’s surprise financial intervention.
The pound has managed to recover ground and London’s top index was in the green on Wednesday after the Bank of England’s surprise intervention to calm gilts markets.
The bank said it would launch an emergency program to buy government bonds – known as gilts – “on whatever scale is necessary” to try to reduce Britain’s rising public debt costs.
That hurt sterling, which fell to around 1.05 against the US dollar shortly after the announcement.
However, the pound had reached around 1.08 by the time European markets closed.
The intervention also appeared to calm the FTSE 100 index, which had fallen again in early morning trading and shortly after the Bank of England announcement.
It fell more than 2% in late morning — down nearly 145 points at 6841.35 — and appeared to be heading for its lowest level in more than a year.
But by the end of the day the index had pared its losses and was above the 7,000 mark, a sign that investor fears had been somewhat relieved by the bank’s bond-buying drive.
The early-morning stock sell-off followed overnight market losses in the US and as the International Monetary Fund (IMF) piled more pressure on Chancellor KwaZulu-Natal, warning that his deep tax cuts would raise inflation and Inequality will fuel both.
The pound fell to a record $1.03 on Monday after Mr Quarting’s tax-cutting mini-budget and fears it could slide towards parity unless the UK government addresses financial market concerns over its plans to cut taxes. Can’t reduce.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “The IMF’s move has added to concerns that the UK is rapidly adopting the characteristics of an emerging market economy, and its developed The country is in danger of losing its status.
“Not only is it now grappling with trade barriers, an energy crisis and rising inflation, it is also being closely watched by the international body known as the world’s lender of last resort. “
The Bank of England is facing calls to call an emergency meeting to consider raising interest rates to try and counter the government’s tax cut measures.
The bank’s chief economist, Hov Pill, said on Tuesday that a “significant fiscal response” may be needed, but hinted that it would not come until policymakers meet as scheduled in November.
But some analysts suggested the bank’s intervention on Wednesday could buy it some time before the November meeting.
JP Morgan economist Alan Monks said: “The Bank of England’s latest rhetoric confirms our view that the bank will increase its stance and do what is necessary to keep inflation expectations from rising. He is ready to act, yet act without haste.
“We think the bank will have to deliver something close to what markets expect at the November meeting to keep a lid on inflation expectations and stabilize the currency.”