Pound falls to five-month euro low following Bank’s Quarterly Bulletin
A warning from the Bank of England about the UK’s debt levels has sent sterling plummeting to a five-month low against the euro. The pound dropped as low as €1.1016 – the lowest level since April
In the meantime, the pound dropped as low as $1.6134 – its lowest against the US Dollar in almost three weeks.
The fall in the currency came after the Bank of England’s Quarterly Review said: “The financial crisis may have led overseas investors to reassess their willingness or ability to purchase sterling assets and thereby finance the UK trade deficit.
“It is possible that sterling’s depreciation may be part of a more prolonged process of rebalancing of the UK economy, generating a fall in the long-run sustainable real exchange rate,” added the report.
Last week, the Office for National Statistics (ONS) revealed the UK’s public sector net borrowing surged to a record £16.1 billion in August, up from £9.8 billion a year ago.
August’s rise takes net borrowing to £65.3 billion for the five months of the financial year so far.
Overall debt now stands at £804.8 billion – the equivalent of 56.8% of GDP.
Meanwhile across the Atlantic, Wall Street was hit after a survey of US economic prospects was worse than expected.
At midday, the Dow Jones industrial average was down 30.91 at 9,789.29 after the Conference Board’s index of leading economic indicators gained 0.6% to 102.5.
While this was the highest reading since January 2008 – it was worse than the 0.7% expected by the market and added to fears that economic recovery may be stalling.
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