LONDON: Sterling hit a one-month low on Tuesday, hurt by comments from Bank of England policymaker Ian McCafferty who said more quantitative easing was likely to be required if the UK’s economic decline worsens.

McCafferty, a policy hawk in the nine-member monetary policy committee, wrote in the Times that the bank rate can be cut further, closer to zero, and quantitative easing can be stepped up.

In early deals in London, sterling fell 0.5 percent to $1.2968, its lowest since July 12. It recovered a tad to trade at $1.3004 after industrial data for June came in line with expectations.

Data released showed British industrial output grew at the fastest rate since 1999 in the second quarter of this year. Industrial output rose 0.1 percent month-on-month in June - in line with economists’ forecasts - after a 0.6 percent drop in May, the Office for National Statistics said on Tuesday.

Still, in a sign which did not bode well for the currency, Britain’s trade deficit surged in June, with the economy sucking in a record amount of imports - including from the EU.

“Industrial production matched estimates while the trade balance overshot,” said Tobias Davis, head of UK corporate Treasury sales at Western Union. “Sterling/dollar does look to be stabilising, however, we expect selling pressure to continue to build.”

The euro was up 0.3 percent at 85.30 pence, having risen to 85.405, also its highest in a month.

Speculators had been selling the pound in the run up to last week’s Bank of England meeting when policymakers lowered rates to record lows and announced a quantitative easing programme to cushion the impact on the economy from Britain’s vote to leave the European Union.

Data from the Commodity Futures Trading Commission released on Friday showed speculators’ bets against the pound were at a record high just before the BoE meeting last week.

One of UK biggest banks, HSBC, said sterling could head even lower in coming months as Britain’s yawning current account deficit, at 5 percent of gross domestic product, weighs. They forecast sterling to hit $1.20 by the end of the year and $1.10 by the end of 2017 when they expect euro/sterling to hit parity.

“The UK has a very large current account deficit. This structural weakness will come under immense pressure because of the forthcoming major political and economic changes,” HSBC said. “We find that sterling will need to fall further, and remain weak for a long time, in order to create significant improvements to the UK’s structural position.”—Reuters