BLBG: Pound Little Changed Versus Euro as Bank of England Cuts Rate
The pound was little changed against the euro after the Bank of England cut its benchmark interest rate to an all-time low and said it will buy assets to revive the recession-mired economy.
The British currency stayed lower versus the dollar and the yen after policy makers trimmed the rate to 0.5 percent today, the lowest level since the bank was founded in 1694. The central bank reduced the rate from 5 percent since October and said today it will buy 75 billion pounds ($105 billion) of corporate and government bonds.
“We’re looking at the final frontier in terms of rate cuts,” said Neil Jones, head of European hedge-fund sales in London at Mizuho Corporate Bank.
The U.K. currency traded at 89.22 pence per euro as of 12:10 p.m. in London. Against the dollar, the pound fell 0.9 percent to $1.4064. It dropped 1 percent to 139.34 yen.
The last time the central bank cut the benchmark rate, on Feb. 5, the pound climbed 1.4 percent against the euro and 1 percent versus the U.S. currency. Sterling fell 27 percent against the dollar and 23 percent versus the euro last year as the U.K. economy slumped into a recession.
The use of so-called quantitative easing will add to the Bank of England’s armory as officials struggle to rescue an economy shrinking the most in almost three decades.
Chancellor of the Exchequer Alistair Darling said in a March 3 newspaper interview that the bank has the necessary “levers” and may decide this month that it needs to use them.
The European Central Bank will probably cut its rate by a half-point to 1.5 percent today, all 55 economists in a Bloomberg survey say.
U.K. government bonds advanced today amid declines in stocks.
The gains drove the yield on the two-year gilt down 16 basis points to 1.10 percent. The 4.25 percent security due March 2011 rose 0.32, or 3.2 pounds per 1,000-pound face amount, to 106.22. The 10-year yield slid 25 basis points to 3.39 percent.
