Sterling hits a record low against euro
Pressure mounts as the Treasury prepares to slash the UK’s economic growth forecasts
Gloomy comments by Alistair Darling, the Chancellor of the Exchequer, were yesterday blamed for pushing the pound to an all-time low against the euro.
Sterling reached a 12-year low against the currencies of its major trading partners after Darling said the economy was facing its toughest challenges in 60 years. Sterling was its weakest against the dollar since April 2006, following its worst monthly performance in 16 years in August.
Sources suggested Darling’s stark warning may have been deliberate as a precursor to a downgrade of his growth estimates for the UK in his forthcoming Pre-Budget report.
Weak data showing UK mortgage approvals at their lowest level in 15 years and the manufacturing sector shrinking for its fourth straight month in August also weighed on the pound.
The Treasury attempted to clarify Darling’s comments, insisting they were “consistent” with his previous statements and that he was referring to the global, rather than a specifically British situation. It also dismissed talk of a rift between Brown and Darling.
But economists said the chancellor had exacerbated the growing pressure against the pound. “His comments have helped to increase growing concerns over the UK economy,” said Jonathan Loynes, economist at Capital Economics.
“The sharp fall early this morning was consistent with it being a reaction to Darling’s comments,” added George Buckley, chief UK economist at Deutsche Bank.
