The pound fell against the dollar on Monday despited the Bank of England ratcheting up their daily bond purchases for the remainder of their support package.
GBP/USD fell to 0.37% to 1.1052 as the Bank of England announced they would increase daily bond purchases to £10bn from £5bn.
“I’m not so sure that this is a good sign to be frank. We should remember that market interventions of this type by the central bank are not normal. It is extraordinary and the fact the BoE needs to increase the daily level of liquidity for its remaining five auctions shows that its initial interventions were unsatisfactory,” said Joshua Raymond, Director at financial brokerage XTB.
The Bank of England stepped into the UK gilt market to support yields following the announcement of the UK government’s radical fiscal package that led to severe volatility in bonds and the pound.
With the pound falling today, investors will be concerned about how the market will react to the removal of the BoE measures on Friday.
“While this programme is designed to provide calm to the markets following concerns about pension funds dumping gilts on the market, the fact it has doubled the previous limit of £5 billion also acts as a reminder that we’re living in unsettled times,” said Russ Mould, investment director at AJ Bell.