Expect a sterling slide

The pound recently fell to a three-year low against the US dollar - and further declines look likely.

The pound is "arguably the most vulnerable currency in the world alongside the yen", says Stewart Cowley of Old Mutual Global Investors. It's certainly been behaving that way. Last week it fell to a three-year low below $1.50 against the US dollar, taking its losses against the greenback this year to 10%. Against the euro it has fallen to a four-month low.

Further declines against the dollar look likely. The key reason is the "relative divergence of monetary policies", says Dagnar Dvorak of Baring Asset Management. In Britain, monetary policy is loose. The new Bank of England governor, Mark Carney, has indicated that it could well be loosened further.

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