Pound rebounds more than 1% on central bank bond purchases
British stocks closed lower on the 29th (local time) when British Prime Minister Liz Truss announced that she would stick to a huge tax cut that has sparked controversy.
The London Stock Exchange’s FTSE 100 index closed at 6,881.59, down 1.77% from its closing price the previous day.
The pound rebounded by more than 1% that day, after plunging to record lows earlier this week, but the market’s reaction was lukewarm.
The exchange rate of the pound against the US dollar rose 1.66% to $1.1069 at 6:00 PM UK time on the same day.
Analysts see a temporary rebound after the Bank of England (BOE) announced a massive purchase of government bonds the day before.
Esther Reichel, head of foreign exchange strategy at Commerzbank in Germany, told Reuters that “it showed that the BOE is ready to act if the market pressures it.” he warned.
Jonas Goldman, who is responsible for market analysis at Capital Economics, a British consulting firm, evaluated the BOE’s intervention, saying, “It may prevent a sharp decline in the value of the pound, but it cannot be a rising boost.” r value. of the pound in the long term.”
Prime Minister Truss, who has been silent for almost a week, said that he would not change the direction of the tax cut policy in an interview with BBC Radio.
“We had to take urgent action to grow the economy, keep the UK moving and deal with inflation,” Truss said.
The UK government announced on the 23rd the biggest tax cut in 50 years, worth £45 billion (about £70 trillion won).
In the process, he did not reveal a plan to compensate for the drop in tax revenue, nor did he independently evaluate it, causing the global financial market to fluctuate.