FXstreet.com (Barcelona) - American Dow Jones closes a 4% down, dropping under 6800 its lowest point since 1997. The decline in U.S. stocks triggered by another bailout for AIG (an American insurance company) sending risk sensitive currencies to the downside. Pound was the most affected, falling to a five weak low against dollar, reaching as low as 1.3955 before halting the fall. Euro also suffers investor's fears and stays under 1.2600.
Both currencies are being sold ahead of the Central Banks rate decisions later this week. While the Euro zone still has room to cut even further (actual rate remains at 2.00% and market is forecasting a 0.5 basis point cut), the BOE is close to an all time low (actual rate is just 1.0%)and quantitative easing process could be next step. This increase in money supply will decrease the value of the currency, that's part of the reason why investors are unwilling to hold the pound.