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Oct 07 - 07:55 AM

GBP/USD - COMMENT-BoE Cliff Edge Looms For Sterling And Gilts

By Rob Howard  —  Oct 07 - 05:45 AM

Oct 7 (Reuters) - Sterling looks set for further volatility through the end of next week - when the Bank of England's temporary long-dated gilt purchase programme is due to end.

The pound might be negatively impacted if the programme ends as planned on Oct.
14 and long-dated gilt yields spike in the aftermath.
This risk may at least be postponed if the BoE announces an extension to its gilt backstop by a week or two (BoE QT is scheduled to begin on Oct.
31).

Extending the backstop could encompass a new date for UK finance minister Kwasi Kwarteng's fiscal plan, assuming it is brought forward from Nov.
23 next week.
The plan could help sterling and gilts if it is well received - in contrast to Kwarteng's "fiscal event" on Sept.
23, which torpedoed the pound.

GBP/USD has traded a daily range in excess of two cents on seven consecutive days since the BoE stepped into the gilt market on Sept.
28, having traded a two-cent+ daily range just once in the six weeks before Sept.
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Related comments: nL1N3150FNnL1N3140K8

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Source:
Refinitiv IFR Research/Market Commentary

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