Sterling went into its steepest daily decline against the single currency in 5 months yesterday, losing 1.2%, after Mr. King revealed that he was content with the current value of the pound.
- Sterling hit its lowest euro price since early April, extending broad losses after Mervyn King said that a weak pound was supporting a necessary rebalancing of the UK economy.
- The euro was also supported by a further rise in business confidence in Germany. Although expectations for the Ifo economic survey were not matched in September’s report, the modest increase reflected optimistic future expectations for economic recovery.
- Demand was further eroded as the Daily Telegraph reported yesterday that the Bank of England was set to meet with economists in a “crisis” meeting designed to stem alarm and confusion over the QE program and the weakness of the pound.
- Additionally, once the pound broke below the 1.10 level, automatic sell off points were triggered, driving sterling down to a near six month low of 1.0922.
- The pound has slid further in trading this morning, losing another 0.5%, and currently trading around 1.0900.