U.K. Financial Watchdog Examining Pound Jump Before BOE Call

LAGOS (Capital Markets in Africa): The U.K. Financial Conduct Authority said it’s examining the spike in the British pound about 15 seconds before Thursday’s Bank of England’s interest-rate decision.

Sterling shot up toward $1.31 just before BOE officials surprised markets by announcing that they had voted 7-2 for no change to the policy, even though many analysts and investors had expected a closer decision or a rate cut. The move prompted traders and analysts to wonder if there had been a leak.

“We are aware of the incident and are looking into it,” a spokesman for the FCA said by email. A BOE spokeswoman declined to comment.

It’s the second time the FCA has looked into issues related to the BOE in as many months. Andrew Bailey, the current head of the FCA, will replace Mark Carney as BOE Governor in March.

There was also a volume surge in the minute beforehand, according to traders.

“There were a few gasps going around the room when the pound jumped just prior to the announcement,” said Simon Harvey, a London-based analyst at Monex Europe Ltd.

Market Sensitive
Central bank announcements are among the most market-sensitive, with tight arrangements for the release of information. This week, the BOE’s vote on interest rates took place on Wednesday. The result was communicated the following day at noon on the BOE website and by journalists who had been at the bank for two hours beforehand, without internet or mobile phone reception.

“Leaks or no leaks — am pretty sure the BOE will internally investigate because it does look a bit odd,” Viraj Patel, a currency and macro strategist at data-science company Arkera Inc., said on Twitter.

The central bank was embroiled in controversy just last month after it emerged that some traders had accessed a high-speed audio feed of BOE press conferences. The feed is subject to a probe by the U.K.’s financial regulator, considering whether it could have given traders an unfair advantage.

It’s Unusual
The currency had been under pressure all week before the meeting, with money markets seeing the decision as a coin toss. It rose 0.6% on Thursday and was trading 0.2% higher at $1.3125 as of 8:05 a.m. in London.

“Market talk suggests there was a move higher in spot about 15 seconds before the announcement, which is unusual — I wouldn’t like to say what caused it, which would have to be properly investigated,” said Jane Foley, the head of currency strategy at Rabobank in London.

Source: Bloomberg Business News