Sterling set to fall further against euro

Sterling is heading for fresh falls in coming weeks as worries about a deepening recession in the UK, highlighted by the Bank of England, keep expectations of further monetary easing intact.

In its quarterly inflation report yesterday, the Bank of England forecast that the British economy will barely grow this year and cut its projections for future years, although it appeared in no hurry to pump more cash into the economy or to cut interest rates.

Sterling jumped after BoE governor Mervyn King dampened what had been growing expectations of an interest rate cut, arguing that such a move would damage some financial institutions and be “counter-productive”.