The U.K. pound climbed against the euro for a third day on speculation the Bank of England will make the last of a series of cuts to its benchmark interest rate today, while the European Central Bank signals further reductions. The pound also rose versus the Swiss franc and Australian dollar. Britain’s central bank is likely to lower the key rate to 0.5 percent from 1 percent today, according to the median estimate of 60 economists in a Bloomberg survey. The ECB may cut its rate to 1.5 percent from 2 percent, a separate survey showed. “The foreign-exchange market has been factoring in the Bank of England making that final move to zero amid expectations of a sharp recovery for the pound,” said Neil Jones, head of European hedge fund sales at Mizuho Corporate Bank Ltd. in London. “The currencies that are moving from higher yields to close to zero will suffer. Once arriving at 0.5 percent, the currency makes a sharp turnaround.” The pound strengthened to 89.01 pence per euro by 11:20 a.m. in London, from 89.21 pence yesterday. It climbed to 1.6637 Swiss francs from 1.6573. Against the dollar, the British currency fell to $1.4106 from $1.4194. The last time the central bank cut the benchmark rate, on Feb. 5, the pound climbed 1 percent versus the U.S. currency and 1.4 percent against the euro. Britain’s currency fell 27 percent against the dollar and 23 percent versus the euro last year as the economy slumped into its first recession since 1991. The Bank of England reduced its benchmark rate to 1 percent from 5 percent since October as it tried to fend off the U.K.’s first recession in 17 years. The ECB cut its main refinancing rate to 2 percent from 4.25 percent in the same period. BOE ‘on Track’ “The Bank of England is on track, unlike the ECB, which is lagging,” Philip Tyson, head of interest-rate strategy at MF Global Securities Ltd. in London, said in a Bloomberg Television interview. U.K. government bonds advanced today as declines in stocks spurred demand for the safety of fixed-income assets. The gains drove the yield on the two-year gilt down five basis points, or 0.05 percentage point, to 1.20 percent. The 4.25 percent security due March 2011 rose 0.10, or 1 pound per 1,000- pound face amount, to 106.03. The 10-year yield fell three basis points to 3.61 percent. The difference in yield, or spread, between two- and 10-year gilts widened three basis points to 241 basis points, the most since at least 1992. Quantitative Easing The Treasury or the Bank of England may announce today details of their plans for so-called quantitative easing where by they will buy fixed-income securities, including gilts, to bring down interest rates. Chancellor of the Exchequer Alistair Darling said the central bank may start buying gilts as soon as this week, the Daily Telegraph reported March 3. Gilts may drop if quantitative easing plans fall short of expectations, RBC Capital Markets said. The market is expecting authority to be granted for purchases of between 100 billion and 150 billion pounds, John Wraith, head of sterling interest-rate strategy at RBC, wrote in a research note. “Anything less than this would not only be a signal for the market to trade lower, but would miss the opportunity such an announcement represents to get the market doing part of the BOE’s job before it even spends any money,” Wraith wrote. The U.K.’s FTSE 100 Index dropped 1.1 percent and the Dow Jones Stoxx 600 Index of European shares fell 0.9 percent.

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