The pound bounced off fresh 31-year lows against the U.S. dollar on Wednesday, but still remained below the $1.30 threshold amid mounting concerns over the effects of the Brexit vote on the British economy.
GBP/USD hit 1.2797 during European morning trade, a fresh 31-year low; the pair subsequently consolidated at 1.2937, down 0.64%.
The pound came under broad selling pressure after the Bank of England warned on Tuesday of “challenging” risks to financial stability following the Brexit vote and eased regulatory requirements on the banking sector.
BoE Governor Mark Carney said the move represented a "major change" that would help the economy to cope with the Brexit consequences.
In its bi-annual financial stability report, the BoE said the risks it had feared ahead of the Brexit poll had started to materialise, as sterling plunged to 31-year lows and as financial stocks tumbled 20%.
Carney had already signaled last week that more stimulus may be needed over the summer, sparking expectations for a possible rate cut at its August policy meeting.
Sterling was also lower against the euro, with EUR/GBP climbing 0.52% to 35-month highs of 0.8547.
Earlier Wednesday, data showed that German factory orders were flat in May, disappointing expectations for an increase of 1.0%. Factory orders fell 1.9% in April, whose figure was revised from a previously estimated decline of 2.0%.