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| Recession fears weigh on sterling | |
| (39 minutes later) | |
| The pound has sunk to 22-month lows against the dollar after the Bank of England's inflation report warned the UK could be heading for a recession. | |
| Sterling sank more than 3 cents to$1.8769 in the wake of the report. | |
| While the report said growth would be "broadly flat", Governor Mervyn King said there was a possibility that output may fall. | |
| Recent official figures have already shown the UK is struggling with high inflation and faltering growth. | Recent official figures have already shown the UK is struggling with high inflation and faltering growth. |
| Meanwhile, concerns about European growth have also helped the dollar bounce back from record lows. | Meanwhile, concerns about European growth have also helped the dollar bounce back from record lows. |
| The euro recovered slightly against the dollar afcter Tuesday's falls to stand at $1.4916, well off lows of $1.6038 hit last month. | |
| Commodity boost | Commodity boost |
| The US economy is still suffering from the credit crisis but analysts say the deteriorating outlook elsewhere in the world has buoyed the currency's standing. | The US economy is still suffering from the credit crisis but analysts say the deteriorating outlook elsewhere in the world has buoyed the currency's standing. |
| The falling price of commodities, that are priced in dollars, has also helped the US currency. Investors had bought oil and gold to protect against dollar weakness but they are now unwinding those positions. | The falling price of commodities, that are priced in dollars, has also helped the US currency. Investors had bought oil and gold to protect against dollar weakness but they are now unwinding those positions. |
| The euro has been further undermined by military conflict in Georgia that could disrupt European markets. | The euro has been further undermined by military conflict in Georgia that could disrupt European markets. |
| However, analysts cautioned that the dollar's rally might not be sustainable. | However, analysts cautioned that the dollar's rally might not be sustainable. |
| "The scope for a much faster recovery in the dollar is still limited by relatively poor economic fundamentals in the US," said Julian Jessop, chief international economist at Capital Economics. | "The scope for a much faster recovery in the dollar is still limited by relatively poor economic fundamentals in the US," said Julian Jessop, chief international economist at Capital Economics. |