King's statment puts selling pressure on the pound, allowing a broadly weaker dollar to gain

The possibility of further monetary stimulus in the UK economy sent the pound tumbling against the dollar yesterday closing down at $1.6488.

• The pairing, which had reached a 1.6655 high in early trading, reversed sharply as BoE governor Mervyn King explained that the central bank was considering reducing its deposits rate in order to discourage banks from accumulating reserves.
  
• In testimony before UK parliament, Mervyn King, governor, said he was looking at “reducing the remuneration” of commercial bank reserves.
  
• The potential for lower deposit rates and gloomy assessment weighed on UK government bond yields and pulled the pound down to an intra-day low of $1.6402.
  
• Additionally, in the US, positive economic figures supported the dollar as investors were prompted to return to the theme that the US is at the forefront of a global economic recovery.
  
• For months, the greenback has tended to fall following strong data as investors' willingness to buy riskier assets strengthens. That trend has shown signs of diminishing though recently, and resuming its more traditional correlation to economic data.