The pound continues to fall, reaching a fresh 31-year low against the US dollar on Tuesday, as concerns over Brexit impact on the UK economy intensified after the publication of the Bank of England’s report.
During early US trade, the GBP/USD pair reached 1.3055, the lowest level since September 1985, then consolidated at 1.3068, shedding 1.65%.
The pound weakened after earlier on Tuesday the Bank of England warned of "coming difficulties" in relation to financial stability risks caused by the Brexit results and reduced requirements for the volume of capital reserves for banks.
The head of the Bank of England, Governor Mark Carney, said that this move implies "substantial changes" to help the economy to overcome the consequences of Britain leaving the EU.
In its semi-annual Financial Stability report, the Bank of England said that the risks, which feared before the referendum, are already materializing, the pound has fallen to 31-year lows, while the shares of the leading banks in the UK have fallen by an average of 20%.
The report came after Markit research firm said that the index of business activity in the UK services sector fell to 52.3 last month from 53.5 in May. Analysts had expected a growth to 52.5.
Despite the fact that the service sector continues to expand, Markit said that growth in the second quarter as a whole proved to be the slowest since the first quarter of 2013.
Markit also noted that 89% of surveys were carried out before the United Kingdom voted in favor of the exit from the EU.
The pound was also sharply lower against the euro: EUR/GBP pair rose 1.78% to a 21-month high of 0.8542.
Meanwhile, the US dollar rose against the Canadian dollar as the concerns over Brexit consequences for the global economy supported demand for the greenback as a safe haven.
In early US trade, the USD/CAD pair reached 1.2941, the highest since Friday; the pair subsequently consolidated at 1.2948, rising 0.80%.
The pair was likely to receive support at 1.2714, the high of June 24, and resistance at 1.3108, the high of June 28th.