We think the biggest falls in the pound may now be behind us. Granted, Moody’s decision to strip the UK of its AAA rating drove the currency down even further early on Monday. But sterling was fairly stable yesterday and could benefit soon from a shift in perceptions of sovereign credit risk in the UK compared to elsewhere. The threat from a potential divergence in the unconventional monetary policies of the Bank of England and its peers abroad is probably also overstated.
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