Sterling plunged against the dollar and euro on Monday, pressured by Moody's downgrade on Barclays, weak UK data, and the prospect of another Bank of England interest rate cut this week. Investors dumped the currency as the UK banking fears gripped the market, swiftly reversing last week's strong gains, when sterling enjoyed its biggest weekly percentage gains against the dollar in over 20 years.
"Negative headlines on the domestic banking sector in the UK are weighing on sterling against the G10 crosses," said Dustin Reid, senior currency strategist, at RBS Global Banking and Markets in Chicago. A Reuters poll showed that markets expect the BoE to cut interest rates to another historic low at 1.0 percent on Thursday, from the current 1.5 percent.
By 1511 GMT, the pound fell 2.0 percent to $1.4203. It hit a session low at $1.4053 earlier, according to Reuters data, well below last week's levels when it hit its highest since January 19 at $1.4527. The euro meanwhile rose 2.6 percent to 90.34 pence, after tumbling to its lowest since mid-December on Friday of just above 88 pence. Trade-weighted sterling also resumed its losses, falling to 76.60.