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Sterling Loses Support

H.S. Borji
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Sterling Loses Support

The British pound declined sharply Monday, as the forex market reacted to latest comments from Bank of England Deputy Governor Charlie Bean.

In a speech to the North East Chamber of Commerce, Bean expressed concern that any additional strength for the pound could weigh on Britain’s export-based recovery. Bean noted that sterling’s decline in value after the financial crisis didn’t result in higher demand for British exports.

“Despite the slowdown in our main export markets, that should have been sufficient to give a kick to net exports,” Bean said in a speech at the Rockcliffe Hall Hotel in Darlington. “The performance of exports – particularly exports of services – has, however, to date been somewhat disappointing.”

Bean later added, “Any further appreciation of sterling, which has risen almost [ten percent] in trade-weighted terms since March [2013], would not be particularly helpful in terms of facilitating a rebalancing towards net exports.”

Heading into the Monday session, market sentiment was already weaker due to disappointing Chinese trade and inflation data, which according to experts could threaten to undermine China’s 7.5 percent annual growth target.

The GBPUSD currency pair fell to a session low of 1.6622. The pair would later consolidate at 1.6640, the lowest level in nearly a month. This represents a daily loss of more than 0.5 percent.

The EURGBP currency pair rose more than half a percent to 0.8343, as forex traders continued to bid up the euro. The common currency received a boost last week after European Central Bank President Mario Draghi described the euro region as an “island of stability.”

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