Sterling weakens after key announcments

Sterling weakened by 0.35 cents (0.21%) against the US dollar yesterday, finishing the day at $1.6369.

• In early trading yesterday the pound weakened against the dollar after the US Fed’s monetary policy decision the day before was generally viewed positively by the markets. Its decision not to expand its asset purchase program was taken as a sign the deep US recession was easing. However, its clear indication that interest rates would stay low for some time dampened expectations of early rate rises, capping the greenback’s gains to some extent.
  
• Also weighing on the pound were Mervyn King’s cautionary comments on Wednesday which, together with a gloomy OECD report about Britain’s growth prospects, reduced investor appetite for sterling-denominated assets.
  
• The dollar received an added boost mid-afternoon after a government report showed the number of US workers filing new claims for jobless benefits unexpectedly rose last week. This prompted several investors to buy into the perceived safe-haven of the greenback.
  
• In trading so far today the pound has risen slightly against the greenback, as investors continue to digest this week’s economic releases.
  
• There are no major announcements due in the UK or US today.