26/06/2014: The impact of the BoE financial stability report on Sterling

Once again the major move of the morning for major forex pairs has come on Cable. Sterling has rallied after the announcement of the Bank of England’s financial stability report.

The report focused on measures to help curb the buoyant UK housing market, which Mark Carney has described as the biggest threat to the UK economy. The measures include limiting the provision of mortgages to purchase houses with a loan to income of over 4.5 times. Also measure to effectively stress test borrowers to see if they can cope with a 3% rise in interest rates over a 5 year period.

The markets have seen these measures as not as far reaching as perhaps had been feared. This means that the housing market would not be instantly be impacted.

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Trading reaction has been a positive for Sterling. This has meant that GBP/USD is back above the pivotal $1.7000 level and has now added 45 pips on the day. There has also been a pull lower on EUR/GBP which is now back below £0.8000 and the sterling bulls will have the key support at £0.7956 in their sights.

Furthermore, the share prices of UK house builders have also jumped around 3% to 4%.

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