LONDON, Jan 19 (KUNA) — The British Pound dropped Monday amid further worries about the UK banking system.
The euro has also fallen against the dollar on weak economic news in Europe.
Downward pressure on the euro came after the European Commission said the eurozone economy will shrink 1.9 percent this year, and only see weak growth in 2010. Sterling fell after the UK unveiled a new rescue plan for banks, and Royal Bank of Scotland warned of big losses.
The euro was at 1.3190 dollars, down 1.2 percent, and the pound fell to 1.
4569 dollars, down two percent.
Analysts said there is a great deal of uncertainty over the health of the eurozone economy, and the outlook for eurozone credit fundamentals, which is undermining investor confidence towards the single currency.
In the UK, the Government announced a second package of measures to encourage banks to lend to individuals and businesses.
There is a lot of confusion in the London Stock Market as it digests the ramifications of this bail-out deal, the analysts added.
Meanwhile, Royal Bank of Scotland said it would post a 2008 loss of up to eight billion pounds, excluding write-downs, which could amount to 20 billion pounds.
There are still heavy losses being announced by the banking sector, and the market fears the Government taking major stakes in banks, the analysts said.