Pound Weakens on Fears of Double-Dip Recession

The Great Pound weakened today after the central bank’s policy makers suggested that the budget spending cuts might throw the Britain’s economy back into recession.

The GfK NOP index of the consumer sentiment dropped to -19 this month from -18 last month. This drop added to the general opinion that the fundamentals in the U.K. remain weak. The concern among the economist is that the pound’s gains may actually lead to the double-dip recession.

Adam Posen, the member of the Monetary Policy Committee of the Bank of England, voiced his concern about the effect of the spending cuts on Britain’s recovery today. He said:

With the strong recovery outside of western Europe proceeding on one side, and the coming austerity at home and in the euro area on the other, I think the U.K. is still poised between two very different outcomes. That leaves the U.K. economy tentatively in the recovery state, but still subject to switching back into the recession state.

GBP/USD traded near 1.4946 as of 20:57 GMT today after opening at 1.5064. GBP/JPY fell to 132.19 from its opening rate of 133.44.

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