UK’s return to recession hits sterling

The pound remains under pressure as twin fears about the state of the UK’s economy and public finances continue to weigh heavily on the currency

Hickey and Walters (Bespoke) submit: The US Dollar Index has pulled back from 52-week highs in recent weeks, and it is now sitting just above its 50-day moving average. At the same time, the euro really hasn't bounced much, and it remains in a nasty downtrend. Two currencies that have gained ground in recent weeks are the British pound and the Swiss franc.

The FTSE 100 makes strong progress but sterling strength hits the plumbing goods stock

The pound dropped to a five-month low against the euro after the market reacted to a Bank of England report warning that the financial crisis could have prompted a downward reassessment of sterling's long-term value

Sterling slid to fresh lows against the euro on Friday, and simultaneously fell against the yen and the dollar, as the rapid deterioration in UK economic data continued to hammer the pound

The pound sterling was worth just 1.1526 euros in London trade on Thursday, its lowest since the 1999 creation of the European single currency. The Bank of England is expected to lower its interest rate later in the day.

Gold Price Today submits: During the past few months the currency markets have been extremely volatile, especially in the crosses involving the euro and the British pound. Beginning the latter half of 2008, both currencies have been down sharply against the Unites States dollar. The euro continued to sell off throughout 2009, and hit multi-year lows during mid-June 2010. The pound however has recovered a little against the US dollar, during the second half of 2009.

The pound dropped to a fresh five-month low against the euro and lost ground against the dollar on Friday as traders continued to punish sterling following comments from Mervyn King, governor of the Bank of England, earlier in the week.