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The Bank of England warned that the markets could bear “another strong correction” even after the steep sale triggered by the announcement by Donald Trump of radical rates last week.
The Central Bank officials said on Wednesday that “the probability of undesirable events” had increased and that the open economy of the United Kingdom was particularly exposed to financial market disorders from Trump’s trade war.
“The global risk environment has deteriorated and uncertainty has intensified … The probability of adverse events and the potential severity of their impact have increased”, the BoeThe financial policy committee said after its quarterly meeting.
He added that “the risk of a new net correction in trigger has increased due to global developments” and that “a major change in the nature and predictability of global trade arrangements could affect financial stability by depressing growth”.
The comments came while the shares continued to drop on Wednesday, joined by state obligations led by a Sale of US Treasury Voyage.
The central bank has warned that the increase in government loan levels has left the vulnerable financial system to “strong increases in public bond yields” which could “crystallize relatively quickly, in particular if they are accompanied by fast capital outflows”.
However, the BOE said that hedge funds have so far been able to face net falls on the financial markets. Many have exceeded their investment portfolios before the announcement of Trump’s April 2 prices, according to the central bank.
“Although the margin calls encountered by the funds after April 2 have been significant, they had so far been able to meet them without taking measures which would more amplify the liquidity of the market,” said BOE.
It’s a story in development
