Sterling slides further in the wake of a damning UK economic report

The pound maintained its downward trend yesterday, losing a further 0.6% as a British report cast doubts over UK recovery prospects.

  • The outlook for global monetary policy shaped action on the foreign exchange markets on Monday, with sterling the main casualty.
  • A report from the Centre for Economics and Business Research predicted that UK interest rates would remain at their historic low of 0.5% through 2010. The report also forecast they would stay below 2% until 2014.
  • That would be likely to leave sterling the lowest-yielding major currency at a time when interest rates outside the UK look set to start rising, which added selling pressure to the fragile pound.
  • In trading this morning, the UK currency has continued to lose ground, with a positive housing price survey failing to buoy demand.
  • Sterling may find some support today should the Consumer Price Index reveal a slightly higher inflation rate at 09:30BST. Gains may be short lived however, with forecasts predicting an upbeat German economic sentiment survey, figures of which are released at 10:00BST.