FCA To Investigate Sudden Jump In Pound Sterling

The Financial Conduct Authority [FCA] will launch an investigation into a sudden jump in the value of pound sterling just prior to the Bank of England’s announcement about increasing interest rates. The FCA released a statement that said they were investigating a claim that the potential rise in interest rates from 0.5% to 0.75% had been leaked to specific traders before an announcement was made.

Timing Question Marks

According to reports from the London Stock Exchange, the value of sterling saw a significant increase in value just seconds before the adjustment was announced to the public by the Bank of England’s Monetary Policy Committee (MPC), rising from $1.302 to $1.309 against the US Dollar and a similar jump against the Euro.

This has raised questions as to whether traders had insider knowledge about the announcement and used said information to increase their own returns, a practice which is frowned upon and illegal in many countries.

Leaks

The pound continued to rise in smaller increments, which has only increased suspicion that the information about interest rates rising was leaked to workers in The City.

A statement released by the Bank suggested that, because the vote to increase interest rates was held the day beforehand, there was the potential for confidential information to leak, but the FCA would not jump to conclusions.

Interest Rates

The UK’s interest rates, which are controlled by the Bank of England, were dramatically shrunk during the aftermath of the financial crisis and eventually rose in 2017, the first increase in almost a decade, when the Bank voted to change them to 0.5%.

This utilisation of Quantitative Easing has been credited by many as the key thing that helped the United Kingdom recover from the market crash in 2007-08.

This is not the first time the FCA has announced an investigation into the leaking of information to financial traders.

They were called in December 2019 when it was believed a leak of an audio recording containing highly sensitive information was released to traders before official announcements were made. The FCA is continuing to look into this matter, but have not launched a formal investigation as of this writing.