The assault on the pound continued for the second night in a row as the unit hit a 7 year low plunging through the physiologically critical 1.4000 level for the first time since 2001. FX traders feared that the massive new UK government spending schemes to rescue the ailing banking sector would result in further deterioration of country’ s balance sheet effectively devalued the currency by 3% overnight.

Not a pleasant start of the week for pound bulls with cable crushed on the open of London trade, falling nearly 300 points from the day’s high in response to the second version of the UK rescue plan of its banking sector. The plan announced by UK Chancellor of Exchequer Alistair Darling proposed creating an insurance scheme to underwrite the toxic debts on the books of UK banks. The scope of the program could reach 50 Billion pounds. Additionally UK authorities increased the government stake in RBS to 68% from present 58% share. UK PM Gordon Brown went out of his way to criticize the RBS management, noting that the bank was wholly irresponsible it its investment decisions and that most of its losses came from its exposure to US mortgage backed securities as a result of RBS’s acquisition of ABN-Amro.