Bank of England 'favours weak pound'

The pound fell to a five-month low against the euro on Thursday (September 24th) following Mervyn King’s claims that a weak currency could be good for the UK economy.

In a recent interview with the Journal newspaper, the Bank of England governor suggested a significant fall in sterling would help the economy to rebalance by giving exports a boost.

Mr King told the publication: ’I think the fall in the exchange rate that we have seen will be helpful to that process, but there’s no doubt that what we need to see now is a shift of resources into net exports.’

On Thursday, the pound extended its losses to reach €1.0947 - its lowest level since early April.

Mark O’Sullivan, director of dealing at Currencies Direct, told BBC News that the pound is now likely to fall further against the euro, spurred on by the Bank governor’s remarks.

’If we continue to see the pound being talked down from the top then the downward spiral towards parity with the euro will continue apace,’ he stated.

The pound also dropped by 0.8 per cent against the dollar to $1.6202 in the wake of Mr King’s comments.
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