BOE FSR: UK and global outlook deteriorated materially amid Ukraine war

“The UK and global outlook deteriorated materially,” the Bank of England (BOE) said in its latest biannual Financial Stability Report (FSR) published on Tuesday. 

Additional headlines

Will increase counter-cyclical capital buffer rate to 2% in July 2023.

Ukraine war key to global and UK outlook.

Significant risk of further disruption in commodity markets.

2022 bank stress test will start in sept, results due mid-2023.

Will conduct in-depth analysis into commodity market vulnerabilities.

Risky assets still vulnerable to sharp adjustments.

Liquidity deteriorated in the US Treasury, UK gilt and rate future markets.

Conditions in core UK markets could worsen further, especially if volatility rises.

Risks remain around China property sector.

Falling crypto markets expose vulnerability but not stability risk overall.

UK banks can weather severe economic outcomes.

Stands ready to vary CCYB rate in either direction.

There will be separate stress test of misconduct costs.

Investor confidence in certain stablecoins has weakened significantly.

UK house price growth expected to slow later in 2022 and 2023.

Market reaction

GBP/USD is deep in the red this Tuesday, as recession risks mount on soaring natural gas prices. The BOE report will only add to the pain in the pound.

The spot is currently trading at 1.2041, down 0.51% on a daily basis.

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