Sterling Weakens After Speculation Over EU Exit

Sterling continued to come under broad selling pressure yesterday reaching a fresh low of 1.2008 against the euro. Recent data suggesting a weakening UK economy increases the chance of more quantitative easing (QE) and a possible credit rating downgrade in the coming months. This paired with new speculation on whether Britain will remain in the EU has caused Sterling to be the worst performer in the G10.

The US market also faces the prospect of further monetary easing. Federal Reserve Chairman Ben Bernanke has said he still wasn’t satisfied with the economy’s progress, despite recent signs of improvement, and indicated that he plans to stick with the unconventional programs the central bank is using to lift output. In a recent quote to the media, Ben Bernanke said “I want to be clear that while we’ve made some progress there is still quite a ways to go,”. The Fed has said that continuing these programs such as the $85 billion-a-month QE program hinges on progress in the US job market.