Sterling fell yet further on Friday on perceptions that the UK currency would be allowed to weaken to help the fragile British economy.
- The pound dropped to a fresh five-month low against the euro on Friday as traders continued to sell sterling following comments from Mervyn King that sterling’s fall was helpful in rebalancing the UK economy.
- Some analysts have suggested that these comments which have undermined the UK currency, have become a new policy tool with which the central bank can kick-start the economy.
- Pressure on the pound was also stemming from the UK’s budget deficit and continued speculation that the BoE might yet loosen monetary policy further.
- In trading this morning, slight profit taking has seen the pound cap its losses, with the pair currently trading around 0.15% up for the day.
- Market players say that the outlook for sterling does remain bearish though, and it is set to remain the weakest of the major currencies for some time.