Sterling sentiment will remain extremely weak in the short term with the risk of further near-term losses, but the US currency looks to offer very little value at current levels.
The UK currency remained under pressure on Tuesday. The latest CBI industrial survey recorded a sharp deterioration with the orders index weakening to -39 in October from -26 the previous month and this was the lowest figure for five years. The quarterly survey also registered the lowest level for over 30 years as confidence eroded rapidly. The data will maintain pressure for a series of rate cuts from the Bank of England.
Comments from Bank Governor King were notably downbeat as he stated that the economy is likely entering a recession while the Sterling decline may be faster and larger than expected previously. These comments will reinforce negative sentiment surrounding the economy and currency. Following King’s remarks, Sterling dipped to lows below 1.67 against the dollar, the lowest for close to five years. Selling accelerated in Asia on Wednesday and it fell sharply to lows near 1.62 before a marginal recovery.
The minutes from October's MPC meeting recorded a 9-0 vote for the 0.50% rate cut which was co-ordinated among the global central banks with a deterioration in growth expectations and reduced fears over inflation. The minutes should not have a big impact on rate expectations.
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