The collapse of the British pound was a big event on Friday and at the beginning of today's session. GBPUSD has already recovered from losses as investors gear up for the Bank of England's statement. There are many suspicions about what a central bank might do:
- Some market participants expect 100bp rate hike (the market is already pricing 200 bp hike in November, although last week market expected only 50-75 bp hike)
- JP Morgan points to central bank intervention (this could have already taken place given the fact that GBPUSD rose to 1.09)
- Verbal intervention to stabilize currency exchange
The sell-off of the pound was caused by the new spending plans of the British government and the uncertainty of how these expenses will be financed. Additionally, the current situation is starting to resemble a speculative attack on the pound which took place in the 1980s.
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Source: xStation5
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