The pound slid and gilts surged after Bank of England Governor Mervyn King said measures being taken to revive lending may not work amid a “deep recession.” The British currency tumbled versus the dollar, euro and yen after a report showed unemployment rose in January to the highest level in a decade. U.K. policy makers will probably cut interest rates and boost the money supply, King said today in a press conference following the publication of the central bank’s quarterly inflation report. “People in the market are getting out of the pound,” said Geoffrey Yu, a currency strategist in London at UBS AG, the world’s second-biggest foreign-exchange trader. “King said the U.K. is in deep recession. But the lack of confidence that things will work is the most important and unsettling part of his speech today.” The pound dropped 1.3 percent to $1.4358 as of 11:08 a.m. in London. Against the euro, the British currency sank 1.6 percent to 90.23 pence. It declined 1.8 percent to 130.18 yen. The pound’s trade-weighted index, a gauge of its performance against principal trading partners, fell to 73.91, from 75.26 yesterday, leaving it 3.8 percent higher this year. Gilts jumped, sending the yield on the two-year note to its biggest drop since Dec. 2. The yield on the 4.25 percent security due March 2011 slid 25 basis points to 1.38 percent. The price climbed 0.53, or 5.3 pounds per 1,000-pound ($1,436) face amount, to 105.82. The yield on the 10-year gilt slid 19 basis points to 3.67 percent. Bond yields move inversely to prices.

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