Pound Sterling Falls Again, Euro Subdued

The pound fell again yesterday against the majority of the 16 most actively traded currencies in the market after Bank of England policymaker David Miles said that the UK’s current monetary policy needs assessing given the weak economic growth. Miles went on to state that in his opinion, the country's current state suggested the central bank should run an extremely loose monetary policy.

"Growth remains very weak That's why I think it makes sense for us to assess where the trajectory of inflation is likely to be - I think on the whole it's downwards - and to set monetary policy in a way consistent with inflation moving back to target but also to support growth," Miles told Sky News.

"I think at the moment that implies having a very, very expansionary monetary policy."

Miles, who is member of the nine strong Monetary Policy Committee that sets monetary policy at the Bank of England has continually pushed for greater measures to bolster growth.

Overnight, the dollar rose after the minutes from the latest Federal Reserve meeting raised expectations that the Fed will wind down its bond buying programme by the end of the year. The minutes of the March meeting showed a clear division over when to slow down the asset purchase with one Fed policy maker wanting to slow the down straight away while several others believed the programme could be wound down or stopped by the end of 2013.

The Federal Reserve's stance is in stark contrast to the recent aggressive monetary easing steps from the Bank of Japan. The Japanese central bank last week said it would issue $1.4 trillion over the next two years as it tries to combat deflation and boost its own economy.

The euro was subdued yesterday after a report out from Prime Minister Mario Monti’s office suggested that Italy’s debts are set to reach a new high this year with public debt set to rise to 130.4% of gross domestic product in 2013 from 127% in 2012, a post-war record. The budget deficit is expected fall to 2.9% of GDP this year, placing Italy within the European Union’s 3.0% limit.

Meanwhile, International Monetary Fund Managing Director Christine Lagarde said yesterday that the threat from the world's biggest banks was "more dangerous than ever" and called for urgent reform saying “In too many cases, from the United States in 2008 to Cyprus today we have seen what happens when a banking sector chooses the quick buck over the lasting benefit, backing a business model that ultimately destabilizes the economy. We simply cannot have pre-crisis banking in a post-crisis world," she said.