British Pound Under Pressure Amid Discord Between BOE's King, Treasury's Darling

The British pound fell sharply against the US dollar during European trading, but made some headway in the US trading session thanks to a broad revival in risk appetite.

There was no UK economic data on hand, but there were signs of turmoil in the relationship between the UK Chancellor of the Exchequer Alistair Darling and the Bank of England. During comments given in front of the Commons Treasury committee, BOE Governor Mervyn King said that he had not been consulted on the Treasury’s proposals for regulatory reform and said that the BOE’s powers were not as great as its responsibilities to maintain financial stability, stating, “…you, in parliament, must be clear that the Bank of England can only publish reports and make speeches.” The discord signals a power struggle between the central bank and government, suggesting that Darling and/or King may be letting politics getting in the way of prudent fiscal governance.