Sterling falls against both the euro and US Dollar

Bullish global equity markets were unable to prevent the pound from falling to an 11-week low of €1.1461 yesterday before eventually closing at €1.1475. Sterling remains at a low of €1.460 this morning.

Having made gains after the CPI inflation report was released last Tuesday, sterling began to slide after the Bank of England's MPC minutes were published. Sterling spiralled in reaction to the news that three of the MPC were keen for an even greater extension to quantitative easing than the £50 billion that was eventually decided on.

Duncan Higgins, Senior Analyst at Caxton FX says, "Investors sensed the gap between the Bank of England and other Central banks. Whilst the UK are extending their monetary policies, the ECB are winding down measures to stimulate their economies.

"Therefore we expect sterling's current weak position to continue in the short term as investors remain wary of poor economic figures. However, the pound may also benefit in the medium term from added pressure on the euro. There seems to be a significant divide forming between the eurozone economies, in terms of who is recovering the fastest. This is a potentially explosive situation that could hurt the investment potential of the single currency."

Sterling also struggled to hold its value against the US Dollar yesterday, eventually losing nearly a cent to close at $1.6415. Caxton FX analysts have suggested that the markets are slowly moving towards long dollar positions, with expectations for a stronger US recovery. Higgins comments, "The dollar's resistance also comes as investors shy away from bold risk taking activity before a week of important economic releases."