Sterling slid after Bank of England Governor Mervyn King said measures being taken to revive lending may not work amid a “deep recession”.
The pound dropped 1.3 per cent to $1.4358 as of 11.08am in London. Against the euro, the British currency sank 1.6 per cent to 90.23 pence. It declined 1.8 per cent to 130.18 yen.
The British currency tumbled versus the dollar, euro and yen after a report showed unemployment rose in January to the highest level in a decade.
UK policy makers will probably cut interest rates and boost the money supply, Mr King said today in a press conference following the publication of the central bank’s quarterly inflation report.
“People in the market are getting out of the pound,” said Geoffrey Yu, a currency strategist in London at UBS AG, the world’s second-biggest foreign-exchange trader.
“King said the UK is in deep recession. But the lack of confidence that things will work is the most important and unsettling part of his speech today.”
The pound’s trade-weighted index, a gauge of its performance against principal trading partners, fell to 73.91, from 75.26 yesterday, leaving it 3.8 percent higher this year.
Bloomberg