Sterling comes back from the brink

Sterling continue its fall against the D-mark this morning, from DM3, lessening the likelihood of another Green Pound revaluation.

Agricultural economists had warned that Sterlings strength could trigger the Green Pound revaluation process if it remained above DM3 for the rest of this week.

But Sterling has pulled back following remarks by Bank of England governor, Eddie George, who said yesterday (20 January) that the Pounds strength was making “life extremely uncomfortable.”

The market appears to have taken Mr Georges statement as a hint that the Bank of England is unlikely to raise interest rates in the near future, say analysts.

By lunchtime today, Sterling had fallen to D2.976.

Many commentators had expected the Bank of England to raise its base rate by 0.25% to 7.50% some time during the coming weeks. But doing so would risk pushing Sterling beyond its recent five-month high and further dampen export prospects for UK businesses.