Currency exchange changes following BoE comment

Currency exchange rates for sterling have altered following comments by the governor of the Bank of England (BoE).

Yesterday (May 12th) Mervyn King warned that the need for the UK to tackle its mounting budget deficit is growing all the more urgent due to the debt crisis in the eurozone.

Following this, sterling fell against the dollar, despite its initial rise on the back on the confirmation of a coalition government between the Conservative party and the Liberal Democrats.

Valentin Marinow, currency strategist at Societe Generale, told Reuters: "It seems the initial enthusiasm at the formation of the new government is fading and the release of their agenda has reminded investors of the hardships that lie ahead for the UK."

He added: "The BoE assessment was fairly dovish with a benign inflation path and this took away some support for sterling."

At 18:00 BST yesterday, the pound bought $1.485, down from the day's high of almost $1.505.

The currency also dipped against the euro, reaching a low of €1.17 at 16:00 BST

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Posted by Chris Barber