Weaker sterling could help Britain narrow its current account deficit, says BoE policymaker

The pound's sharp depreciation following Britain's decision to vote in favour of leaving the European Union should help the UK to narrow its current account deficit, a senior Bank of England policymaker said on Friday (16 September).

Kristin Forbes, an external member of the Bank of England's Monetary Policy Committee, suggested a weaker pound would have beneficial effects for Britain's deficit.

"Sterling's depreciation should improve the UK's net foreign asset position by over 20% of gross domestic product," she told a conference in Paris.

"That's a big improvement in the UK's net international asset position and that should alleviate concerns by international investors about the UK's ability to pay on its net foreign asset position."

Sterling suffered the third-biggest one-day decline of any currency in the world over the past 40 years, after Britain's EU referendum, as it tumbled to its lowest level since 1975. The UK currency has since partly recouped some of its losses and broke above the $1.32 barrier for the first time since the Bank of England cut interest rates early last month.

Despite the recovery, however, sterling remains some way off its pre-referendum highs and was trading sharply lower against both the euro and the dollar on Friday. By mid-afternoon, the pound was 0.82% lower against the dollar, exchanging hands at $1.3126 and fell 0.26% against the euro to €1.1742.