Investing.com - The pound extended losses to fresh 31-year lows against the U.S. dollar on Tuesday, as fears over the consequences of the Brexit vote on the U.K. economy grew stronger following remarks by the Bank of England.
GBP/USD hit 1.3055 during U.S. morning trade, the pair’s lowest since September 1985; the pair subsequently consolidated at 1.3068, tumbling 1.65%.
The pound weakened further after the BoE warned on Tuesday of “challenging” risks to financial stability following the Brexit vote and eased regulatory requirements on the banking sector.
BoE Governor Mark Carney said the move represented a "major change" that would help the economy to cope with the Brexit consequences.
In its bi-annual financial stability report, the BoE said the risks it had feared ahead of the Brexit poll had started to materialise, as sterling plunged to 31-year lows and as financial stocks tumbled 20%.
The report came after research group Markit said that its U.K. services purchasing managers’ index dropped to 52.3 last month from a reading of 53.5 in May. Analysts had expected the index to rise to 52.5 in June.
Despite the fact that the service sector continued to expand, Markit pointed out that the growth over the second quarter as a whole was the slowest since the first quarter of 2013.
Markit also noted that 89% of the surveys were submitted before the Brexit vote.
Sterling was also sharply lower against the euro, with EUR/GBP rallying 1.78% to trade at a 21-month high of 0.8542.