Sterling slumps to a four month low

Sterling fell to a new record low this morning after British manufacturing activity was slower than expected in September.

The pound hit a 4 month low against the euro as export demand fell for the first time in over a year. The data supports Bank of England member Adam Posen's calls for more quantitative easing to boost the UK economy.

The pound fell to 1.1505 against the euro after the report, the lowest level since 21st May. Sterling has fallen 5.3% against the euro in September alone.

Mark Bolsom, Head of the UK Trading Desk at Travelex Global Business Payments comments, "This news adds to the big question mark hanging over the timing and severity of the Coalition's plans to cut spending and hike taxes. Economic data is extremely patchy at the moment - falling mortgage acceptances, rising unemployment and stagnant wage growth all point towards the likelihood of a double dip recession.

"I think quantitative easing is definitely on the cards and Adam Posen is talking about reintroducing it as early as November. With that in mind, it seems safe to expect UK growth to slow in the third quarter of 2010."

Bolsom says that the pound's short term outlook remains weak, "We seem far away from finding a bottom in slowing activity. All fundamentals point to a weak pound and increasing speculation over quantitative easing will drive the pound lower over the next few weeks."