Gold Prices Steady as Hormuz Tensions Fuel Fed Rate Concerns 
Japan Posts First Current Account Deficit in 17 Months as Dividend Payments Surge 
US Job Growth Seen Picking Up in July 
US Stock Futures Flat as Iran Strait of Hormuz Demands Fuel Oil Concerns 
South Korea Raises Interest Rates to 2.75% as Inflation and Weak Won Drive Tightening 
BOJ Rate Hike Expectations Rise Ahead of September Meeting 
Japan PM Sanae Takaichi Unveils Growth Plan as BOJ Independence Concerns Lift Bond Yields 
Oil Prices Rise as Hormuz Reopening Remains Uncertain 
ECB Expected to Hold Rates as Middle East Tensions Keep September Hike in Focus 
South Korean Won Leads Asian FX Losses as Dollar Rises 
Gold Prices Hold Near Seven-Week High as Markets Await U.S. Inflation Data 
RBA Signals More Rate Hikes Possible as Australia Battles Stubborn Inflation 
The Bank of England (BoE) is anticipated to ease the pace of its quantitative tightening (QT) as it prepares to cut interest rates to 4% on August 7. Economists expect the policy statement to outline the central bank’s strategy for reducing its £558 billion ($754 billion) gilt holdings, with a detailed pace to be set in September.
Over the past year, the BoE reduced its balance sheet by £100 billion through £13 billion in gilt sales and £87 billion in maturities. Matching this pace would require record sales of £51 billion in the next 12 months, raising concerns amid recent bond market volatility and political scrutiny over QT-related losses.
Market expectations suggest QT may slow to £75 billion annually from September and further taper to £50 billion by 2026-27, with active sales potentially ending by 2028. Some analysts, including BNP Paribas’ Dani Stoilova, predict an earlier halt to gilt sales to prevent market disruption, especially as long-term bond yields hit multi-decade highs earlier this year.
The BoE faces unique challenges, including a steeper yield curve and falling policy rates, conditions not previously encountered during active QT. Former policymakers suggest the central bank could prioritize shorter-dated gilt sales or focus on rate cuts instead of aggressive bond sales.
BoE Governor Andrew Bailey maintains that QT is not driving higher borrowing costs but acknowledges the need to monitor its interaction with market conditions. With bank reserves still above the preferred minimum range of £385-540 billion, the BoE may cautiously adjust QT, signaling flexibility as it approaches critical liquidity thresholds.
Investors will closely watch August’s statement for insights into the BoE’s long-term balance sheet strategy amid ongoing market uncertainty.
