Sterling falls following Mervyn King's economic speech

Sterling is not performing well in the currency exchange markets as the latest announcement from the governor of the Bank of England suggests that the UK economy remains unstable.

Speaking at the Treasury Committee, governor Mervyn King said that both the low Bank rate and the maintenance of the Bank's quantitative easing program at £200 billion were likely to continue for some time.

Economists said that the poor outlook from the Bank would prevent sterling from gaining much ground against the dollar.

Paul Robinson, sterling strategist at Barclays Capital, told Reuters that there could be further troubles ahead.

"The UK public debt would become more of an issue were there to be a hung parliament and that would be a sterling negative. Also hung parliaments are less stable, adding to uncertainty," said Mr Robinson.

At 15:50GMT one pound sterling bought $1.54, a drop of 0.35 per cent.

Posted by Eleanor Ward

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