The pound was struggling to hold back another sell-off today after signs of cold feet from the US Federal Reserve over its money-printing programme sent traders scurrying into the dollar.
Sterling ‑ already reeling from Bank of England Governor Sir Mervyn King’s shock decision to vote for more stimulus ‑ touched a new two-and-a-half year low of $1.5132 after the minutes of the Fed’s latest meeting emerged overnight.
The Fed has committed to pump $85 billion (£56 billion) a month into the world’s biggest economy until its unemployment rate falls to 6.5%. But comments from several members “emphasized the committee should be prepared to vary the pace of asset purchases” depending on growth and inflation, triggering the sell-off.
The pound fought back from an early plunge after a much bigger than expected £11.4 billion public finance surplus in January, helped by self-assessment returns and company tax receipts. Figures were also boosted by a £3.8 billion transfer of QE interest proceeds from the Bank of England. Capital Economics’ Samuel Tombs said: “Even excluding the transfer, January’s surplus was £7.6 billion compared to a surplus of £6.4 billion in 2012.” And the CBI revealed better-than-expected British factory orders in February, allaying triple-dip recession fears.
