What a calamitous series of events this has been for the UK over the past week. Suddenly now, we're back to QE (well, sort of) and the BOE is now caught in a game up against the market again. There is just no sense of stability as they essentially shelve their plans for QT and taking action to try and fix the "dysfunction" in the market - which we know was caused by the government's policy announcement on Friday, something which the central bank endorsed earlier this week. Geez. You really can't make this up.
This sort of rate dynamics is a massive blow to investor confidence and to anyone looking at UK markets right now. One minute, we're hearing one thing and the next we're seeing something else. Shop talk in the gilt market leading up to this announcement was that it had become "almost untradable" as dislocations are taking place and liquidity conditions were just awful.
But is this the right response?
It's a tough act to balance at a time when they are also seeking to raise interest rates and honestly I reckon the pound will continue to settle lower, once the mess clears up.
For now though, the big source of uncertainty for markets this week i.e. bonds, is being addressed and that will be a major relief for risk trades.
