Sterling plunges following King's statement

Sterling has taken a steep downward turn today following the words of BoE governor Mervyn King who said that the central bank was considering reducing the interest rate in order to provide a disincentive for banks to hoard cash with the central bank, encouraging them to lend. King expressed concern that credit was still not readily available to the consumer and that reducing the lending rate was “something we’re looking at.” This also raised concerns that BoE’s quantitative easing program may not yet be finished, given that more money may have to be injected if the banks continue to refrain from lending. The pound has fallen to a near four month low against the euro of 1.1278 and by two cents from its intra-day high against the dollar, as selling pressure mounts on the UK currency.