The pound slid against the euro and the dollar for a third day and gilts climbed on concern the British recession is deepening, depressing demand for riskier assets such as stocks. The currency also dropped against the yen as the benchmark FTSE 100 Index of stocks declined 1.11 percent. Bank of England Governor Mervyn King said yesterday the economy is in a “deep recession” that may prompt policy makers to keep cutting interest rates and pump money into the economy. Cabinet minister Ed Balls said Feb. 7 the government faces an economic crisis worse than the Great Depression. “The downside risk for the pound has increased,” said Lee Hardman, a currency economist in London at Bank of Tokyo- Mitsubishi UFJ Ltd. “The Bank of England made it clear we’ve a serious economic problem, and they’re moving toward quantitative easing. Although their measures will eventually help the pound, the sentiment toward the currency should remain negative in the near term.” The pound tumbled 1.4 percent to $1.4189 as of 9:19 a.m. in London. Against the euro, the British currency weakened 0.9 percent to 90.46 pence. It declined 1.9 percent to 127.69 yen. Hardman predicted the pound will slide to $1.35 in the next three months. The pound’s trade-weighted index, a gauge of its performance against currencies of Britain’s trading partners including the yen, Swiss franc, euro and dollar, declined 3.7 percent this week to 73.50. The yield on the two-year gilt slid 11 basis points to 1.23 percent, after losing 31 basis points yesterday, the biggest drop since Oct. 6. The price of the 4.25 percent security due March 2011 climbed 0.22, or 2.2 pounds per 1,000-pound ($1,419) face amount, to 106.13. The yield on the 10-year note fell six basis points to 3.55 percent. The Bank of England yesterday cut its forecasts for U.K. gross domestic product and inflation and said the risks to economic growth are “heavily to the downside.”

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