Nigel Farage intensifies attacks on the Bank of England, suggesting policy changes ahead

    by VT Markets
    /
    Oct 22, 2025
    Nigel Farage has recently escalated his criticism of the Bank of England. This raises concerns about the bank’s independence and suggests possible upcoming policy changes, as noted by Stefan Koopman, a Senior Macro Strategist at Rabobank. The UK’s flexible structure can lead to quick shifts in its monetary policy. If Reform UK maintains its polling lead or makes changes to its manifesto, we might see market reactions, like steeper gilt curves and higher risk premiums.

    Impact On Markets

    Such changes could also affect foreign exchange risks and the struggles of interest-sensitive stocks. If trust in the UK’s institutions wanes, even minor reforms might trigger significant market responses. We’re closely monitoring the increasing political pressure on the Bank of England, as it poses a real risk to the market. With Reform UK polling around 18% throughout most of 2025, this challenge to central bank independence isn’t just talk. If they formalize this stance in their manifesto, it will add even more uncertainty to UK assets. For those trading in the government bond market, it’s crucial to keep an eye on the gilt curve. The chaos of autumn 2022 is still fresh in the market’s mind, even if time has passed. A steeper curve with higher risk premiums seems likely, and we have already seen the gap between 10-year gilts and German bunds widen by 15 basis points this month. In the currency market, this situation could lead to a discount on the pound. The risk of political interference might push GBP/USD back toward the 1.20 range we saw earlier this year. Derivative traders should think about buying put options to guard against downside risk on sterling, as implied volatility remains relatively low.

    Strategies For Traders

    This uncertainty will likely impact UK stocks, especially those sensitive to interest rates like banking, real estate, and utilities. As UK debt risk premiums rise, borrowing costs for these companies will increase, affecting their valuations. We could see the FTSE 250 index, which focuses more on the domestic market, underperforming compared to the FTSE 100. In the coming weeks, the main strategy should be preparing for more volatility. Traders can consider buying straddles on the FTSE 100 or GBP/USD to benefit from significant price movements in either direction. The cost of these options will likely go up as the political landscape becomes more prominent, so entering positions early is advisable. Create your live VT Markets account and start trading now.

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