The Sterling falls as King says the weakness was very helpful

The Sterling fell, trading below $1.60 for the first time in more than two months, as world leaders united behind a plan to regulate banker pay and tighten capital regulations for financial institutions. The Pound also dropped against the euro as U.S. officials said Group of 20 leaders meeting in Pittsburgh are near a “broad agreement” on a plan to tie compensation more closely to risk. The pound dropped the most since April versus the dollar yesterday and traded at its lowest in more than five months against the euro after Bank of England Governor Mervyn King said the currency’s weakness was “very helpful” to the U.K. economy. Tightened rules on banking and pay may hurt Britain’s economy more than others because of its dependence on the financial industry, analysts say. London’s square mile, as the country’s main financial district is known, generates a third of U.K. corporation tax revenue and as much as 15 percent of all tax paid to the government, according to Stuart Fraser, the City of London’s policy chairman. The GBP/USD is currently trading at $1.6010 as of 10:35am, London Time.

Orders for durable goods probably rose in August, a sign companies are gaining confidence the U.S. is emerging from the worst recession since WWII, economists said before reports today. Carmakers including General Motors Co. and Ford Motor Co. plan to boost output through the second half of the year to rebuild depleted inventories. The government’s $3 billion cash- for-clunkers incentive to trade in gas-guzzlers for more fuel- efficient vehicles lifted Auto Sales and production last month. Data on new-home Sales, due from the Commerce Department at 10 a.m., will probably show sales rose 1.6 percent to a 440,000 rate, according to the survey median. They reached a record-low rate of 329,000 in January.

Treasury Secretary Timothy Geithner said he sees a “strong consensus” among Group of 20 nations to reduce reliance on exports for growth and defended the dollar’s role as the world’s reserve currency. “A strong Dollar is very important in the United States,” Geithner said in response to a question at a press conference yesterday in Pittsburgh, where G-20 leaders began two days of talks. Geithner predicted agreement on an Obama administration proposal to foster a global recovery that avoids lopsided flows of trade and investment. He said a higher U.S. savings rate this year is an “encouraging sign,” and he indicated that government support for markets will be withdrawn gradually.

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