A jump in the pound just before the Bank of England’s rates decision was announced will be investigated by the markets’ watchdog.
The Financial Conduct Authority said it is “looking into” claims that some currency buyers might have known the decision before it was made public at midday on Thursday.
Before the Bank announced its intention to hold rates at 0.75%, analysts were divided on their predictions, with some saying they had never seen a rates decision so difficult to predict.
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Sterling had started the day weaker against the US dollar, as is usual ahead of the Bank’s big announcements.
At 11.59am it was at $1.3024, but reached as high as $1.3075 in just under a minute, one second before the statement.
After the statement, it continued to rise – at a comparatively muted pace – to $1.3095 in 11 seconds.
Simon Harvey, forex analyst at London brokerage Monex Europe, said he had seen large buy orders of more than £100m for sterling futures seconds before the announcement.
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He added: “There were a few gasps around the room when we saw the price jump quite aggressively.
“We are not used to seeing a big jump beforehand and so it raised eyebrows.”
But Neil Jones, head of FX hedge fund sales at Mizuho Bank, said such a movement before a major announcement was “not always correlated with and predictive of the event”.
Reuters reported that the website for CME, the world’s largest futures exchange operator, showed orders for 1,700 futures contracts, each carrying a nominal value of £62,500 pounds, the biggest by far placed in the hours before the announcement.
CME declined to comment.
Marshall Gittler, chief investment strategist at ACLS Global, said: “A move like this is not an accident. This must have been a big trade.”
SOURCE : https://news.sky.com/story/fca-looking-into-jump-in-pound-before-bank-of-england-rates-decision-11922264