Sterling exchange rates suffer

The UK economy has "only just started" along its road to economic recovery, according to Bank of England governor Mervyn King. In the inflation report released yesterday, the BofE suggested it would be late 2011 before the UK economy recovered to the level it was at before the recession.

"The past year has been extremely painful for most economies around the world," said Mr King "There is a more buoyant picture looking ahead that is encouraging. But this does not alter the extent of the challenges facing the economy."

The pound fell immediately against both the euro and the dollar following the report, on the expectation that interest rates in the UK will remain at 0.5% for some time, this pattern continued throughout the day with Sterling losing significant ground against all major currencies.