Sterling is sliding on worries over US stand-off

Sterling slipped against the euro today as traders’ fears rose that the US political budget stand-off could take the steam out of the British economy's recovery.

The euro rose against the pound to 84p, its strongest level in a week and a half. The pound was also down slightly against the dollar at $1.6107.

Asian equity markets dropped overnight in the wake of yesterday’s striking warning from the US Treasury that a failure of Congress to approve a rise in the federal debt ceiling by 17 October risked plunging the world’s largest economy into another Great Recession.

Japan’s Nikkei 225 index ended down 0.9% and the Hang Seng in Hong Kong lost 0.33%. President Barack Obama has been forced to cancel a visit to the region scheduled for next week because of the budget crisis.

However, equity markets in Europe were steady, with the FTSE 100 trading flat and Germany’s DAX and France’s CAC up slightly.