Pound falls to two-year low as currency markets lose faith in UK
Sterling down to $1.51 as investors digest loss of AAA credit rating and increasingly gloomy economic outlook.
Sterling fell to a two-year low on Monday as currency markets signalled their waning confidence in the UK economy's ability to exit the longest depression in 80 years.
The pound, which has tumbled by 8% in recent weeks, fell to $1.51 as investors digested the loss of Britain's AAA credit status and the increasingly gloomy economic outlook from independent forecasters. As recently as December it was trading at $1.63.
The ratings agency Moody's, which downgraded the UK to the lower AA1, joined many analysts in predicting that the economy will be held back by a longer than expected period of low growth and bigger debt mountain.
Stock markets remained calm and gilt yields, which show the government's borrowing costs, at 2.1% remained higher than Germany's 1.6%, but lower than France's 2.2%.
George Osborne, deflecting criticism of his previous desire to maintain the UK's AAA status, said it was more important that gilt yields remain low, allowing the government to borrow cheaply to fund its debts.....Read more