His comments fuelled fear in the markets that Britain was set to be engulfed in a new era of stagflation, "We are going through a period of time in financial turmoil that most of us can remember."
The sterling fell against the U.S dollar and several other major currencies moving from an overnight high of 1.9742 and is currently trading at 1.9521 as the housing market continues to dampen the economic growth. The UK house prices fell 2.5 per cent in May – the biggest monthly fall since the housing crash in 1991.
The Euro continued to fall against the dollar for the second day running, following speculations that the ECB may have to put interest up next month.
The Euro traded a seven month high against the yen after comments by Erik Liikannen, member of the ECB said that inflation expectations are starting to increase and causing the central banks to be on a state of alert.
The USD dollar strengthened yesterday after senior US official made it clear that they wanted the currency to become stronger. Senior member of the FED and the treasury along with the president of USA , Mr. George Bush threw their weight behind the Greenback on Monday evening prompting a wave of dollar buying that swept through the market yesterday.