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Pound sinks to three-month low following Carney warning Pound weakens further on US jobs news and Bank warning
(about 2 hours later)
The pound has fallen to a three-month low against the dollar, and analysts suggest it could weaken further. The pound has fallen below $1.49 against the dollar, close to a three-year low, as markets digest the prospect of UK interest rates staying low, and the strengthening US economy.
The pound was trading below $1.50 against the US dollar at around $1.499. Sterling was trading at $1.489 in mid-afternoon, down four cents in two days.
The currency dropped sharply after markets were warned by the Bank of England not to assume the bank would start raising rates soon. It is just over half a cent above the low of $1.4831 set in March, which was the weakest level since June 2010.
Sterling began sliding after the Bank of England warned markets not to assume it would start raising rates soon.
News in afternoon trading that US employment grew by 195,000 in June gave the dollar another boost and sent the pound down further.News in afternoon trading that US employment grew by 195,000 in June gave the dollar another boost and sent the pound down further.
The statement came as the Bank held interest rates at 0.5% and kept its quantitative easing programme (QE) unchanged. The US data also revised up the previous two months' estimates by a combined 70,000 jobs, adding further to speculation that the US Federal Reserve may start raising interest rates within the next 12-18 months.
The decisions were made at the first meeting of the Bank's Monetary Policy Committee since Mark Carney took over. The Bank of England's statement on Thursday came as the Bank held interest rates at 0.5% and kept its (QE) quantitative easing programme of buying up UK government debt unchanged.
The decisions were made at the first meeting of the Bank's Monetary Policy Committee since Mark Carney took over as governor.
Harry Adams, managing director of foreign exchange forecaster Argentex called the decision to release a statement alongside the interest rate announcement, despite there being no change in policy as "significant".Harry Adams, managing director of foreign exchange forecaster Argentex called the decision to release a statement alongside the interest rate announcement, despite there being no change in policy as "significant".
"This statement suggests that further quantitative easing is likely and interest rates will remain low for the foreseeable future," he said."This statement suggests that further quantitative easing is likely and interest rates will remain low for the foreseeable future," he said.
"Despite the recent improvement in economic data from the UK, the pound is being beaten up by global investors as the view is that the British currency will continue to offer very little return of interest. "Despite the recent improvement in economic data from the UK, the pound is being beaten up by global investors as the view is that the British currency will continue to offer very little return of interest."
"A three year low at 1.4230 could well be reached over the next couple of months."