Bank of England to purchase £65bn worth of government debts


The pound rose against both the euro and US dollar after the Bank of England announced that it would start buying long-dated bonds, on a temporary basis, in order to calm the market chaos. However near-term volatility is expected to remain elevated. The move was made by the BoE after all the distribution caused over the last week saw Sterling drop to its lowest level against the dollar.

Despite near-term volatility being high up, the BoE’s actions will send a warning shot to investors looking to pile on bets against UK bonds and the currency. The bank stated it stands ready to purchase conventional gilts with a residual maturity of more than twenty years in the secondary market, initially at a rate of up to £5bn per auction.

The temporary purchases of long-dated UK government bonds started. The purpose of these purchases is to restore orderly market conditions. “The purchases will reach whatever scale is necessary to effect this outcome”, said the central bank. The programme is open-ended and without limit, emphasizing a ‘whatever it takes’ approach from the BoE.

Therefore, the outlook for the British pound remains heavily negative with further declines expected.

Key announcements

12:30 – GBP – MPC member Ramsden speaks

13:30 – USD – Final GDP Q/Q – Set to remain unchanged at -0.6%

13:30 – USD – Unemployment claims – Forecast at 215k from previous 213k

14:30 – USD – FOMC member Bullard speaks

18:0 – USD – FOMC member Mester speaks