The pound dropped against the dollar and euro after the Bank of England said all the members of its rate-setting committee voted to cut is key rate this month and discussed the possibility of buying gilts. The U.K. currency was also near a two-week low versus its U.S. counterpart as the Daily Telegraph said the nation’s debt may be downgraded by Standard & Poor’s. Policy makers voted 8-1 to cut the main rate to 1 percent, minutes of the Feb. 5 decision published in London today show. David Blanchflower wanted a bigger reduction to pull the economy out of a recession. “The underlying picture remains pretty weak and sterling remains fundamentally pressured,” said Jeremy Stretch, a senior currency strategist in London at Rabobank International. “For investors, the Telegraph report is just another negative variable they can do without, and they are selling the pound accordingly.” The pound dropped as much as 1 percent to $1.4094, the lowest level since Feb. 2, and was at $1.4161 as of 10:12 a.m. in London. Against the euro, the pound declined 0.4 percent to 88.74 pence, snapping three days of gains. The pound may weaken to $1.35 and 90 pence per euro in the next month, Stretch said. The Monetary Policy Committee, led by Governor Mervyn King, discussed so-called quantitative easing this month as the main interest rate approaches zero. “To the extent that further cuts in bank rate could not inject sufficient stimulus, the committee would need to use alternative policy measures,” the minutes said. The committee agreed that King should seek the Treasury’s permission to “conduct purchases of government and other securities, financed by the creation of central bank money.” U.K. government bonds climbed, with the 10-year gilt yield dropping five basis points to 3.36 percent. The 4.25 percent security due March 2019 rose 0.43, or 4.3 pounds per 1,000-pound ($1,257) face amount, to 109.63. Yields move inversely to bond prices.

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