GBP traded flat against other major currencies in the European session on Wednesday as investors reacted to the quarterly statement of Bank of England’s Financial Policy Committee (FPC ), cautioning about risks of a sharp correction in markets as valuations of assets returned to stretched levels following a spike in volatility in August.
The record of the FPC’s September 19 meeting, released earlier today, revealed that the BoE’s official believed that valuations across several asset classes, particularly equities, quickly returned to stretched levels following a significant spike in volatility in financial markets in August. They also warned that markets remain susceptible to a sharp correction. This correction, in the officials’ view, could affect the cost and availability of credit to UK households and businesses, with investors sensitive to short-term developments in a challenging global risk environment. “Global vulnerabilities remain material, as does uncertainty around the geopolitical environment and global outlook,“ they added.
Also, investors assessed data from the UK which showed the pay settlements awarded by domestic employers remained at their lowest in two years in the three months to August. According to Incomes Data Research, the median pay settlement awarded by major employers stood at 4.0% for the second straight month.