BOE Cuts Again!
06 February 2009
The pound has hit a two-month high against the euro, after the Bank of England slashed interest rates to a record low to tackle the recession. The UK's central bank cut rates from 1.5% to 1%, while the European Central Bank left rates on hold at 2%. The perceived pro-active stance of the Bank of England, compared to the ECB, saw the pound rise above 1.15 euros for the first time since early December.
Sterling also saw gains against the dollar, rising to $1.4767. However, the pound fell back later in the morning after official data showed the biggest annual fall in UK manufacturing output since 1981. At 1040 GMT, sterling was trading at 1.1473 euros and $1.4703.
After ECB President Jean-Claude Trichet insisted that zero rates were not appropriate at the moment, despite the growing recession in the eurozone, currency traders attacked the euro. But sterling's rally against the dollar could be be short-lived, with many experts predicting further losses in the coming months. The pound has fallen significantly against the dollar in the last year. In March sterling stood at $2.03.
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