Sterling weakness drags it down below 1.60 following King’s comments

The pound slid 1.7% against the greenback yesterday as momentum to dump the pound snowballed following comments from King that lent his support to a weak currency.

  • Sterling was at a two and a half month low against the dollar after comments from Mervyn King left FX markets in no doubt the Bank of England was comfortable with a weaker pound.
  • A meeting set up between the BoE and London-based economists to clarify policy also worried investors who maintained their bearish sentiment toward the pound, pushing it lower.
  • An easing of risk appetite added support to the dollar after data revealed a decline in US existing home sales from the previous month and undershooting forecasts.
  • Additionally, as the US markets came online, equity markets took a turn into the red, which supported demand for the haven currency, and brought the price to a close of $1.6064.
  • In trading this morning, sterling has tumbled to a four month low against the dollar as a break of the 1.60 level triggered a wave of stop loss sales.