The British pound started this week losing against currencies like the euro and the dollar as speculations that British banks may announce further losses rose, suggesting that the worst moments of the recession are still to come.
The Sunday Times, one of the most prestigious U.K. newspapers affirmed yesterday that Lloyds Banking Group Plc, one of the giants of the British financial sector, would be in a difficult situation and that it may post further losses, reflecting this Monday on British stocks and the national currency, which is being traded at the lowest level in two months against the euro. Concerns regarding a longer than expected crisis in the U.K. made the FTSE 350 Banks Index to drop 1.5 percent, as U.K. Gilts rose, attracting British investors to the safety of fixed income earnings.
The banking sector in the U.K. has not been posting any alarming news for the past weeks, but this Sunday Times article rose risk aversion among traders that are already concerned with the international economic scenario. The pound may post further declines against the euro, if risk appetite, which was supporting the British currency, fail to reappear. Currencies like the yen and the greenback still have a bullish perspective versus the pound, as the growing risk aversion attracts traders to safer assets.
EUR/GBP traded at 0.8686 as of 10:36 GMT rising from an opening price of 0.8599. GBP/USD fell to 1.6044 from 1.6195.
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