• Home >
• News >
• Forex News

• Send
• Print
• Add To

Stg bounces from record low vs euro; BoE on hold

Thu, Sep 4 2008, 15:39 GMT
http://www.afxnews.com

LONDON , Sept 4 (Reuters) - Sterling rebounded from record lows against the euro on Thursday after the Bank of England left interest rates unchanged at 5.00 percent, as markets expected, but the respite was expected to be short-lived.

The significant headwinds facing the economy were reflected in sterling's trade-weighted index, which fell to a 12-year low for a ninth day as sharply slowing growth was expected to result in monetary easing by the end of the year.

The growing economic malaise was highlighted by the Halifax's latest house price survey showed prices fell 12.7 percent on the year in August, the biggest drop since records began in 1983 [nLAC002927].

Analysts attributed part of sterling's positive reaction to the rate verdict was due to some speculation on the chance of a surprise 25 basis point cut.

"There was a bit of risk-reward trading helping sterling, as there were some who thought the BoE might make a move earlier," said Maurice Pomery at IDEAglobal.

"We are still seeing a lack of confidence in the UK government, and the (Bank of England's) Monetary Policy Committee is seen as being behind the curve," he added.

At 1438 GMT, the euro was down half a percent on the day at 81.19 pence, having earlier hit a record high at 81.86 pence <EURGBP=>. The pound was down 0.1 percent at $1.7725, but holding off Wednesday's 2-1/2 year low of $1.7664 <GBP=>.

Earlier on Thursday, the pound was fixed at a new 12-year low of 88.1 on a trade-weighted basis <=GBP>. It later recovered slightly to 88.4.

Sterling also trimmed its losses against the euro after European Central Bank president Jean-Claude Trichet said the euro zone economy was experiencing weak economic activity.

His remarks came after the ECB left interest rates on hold at 4.25 percent, as expected.

The market's focus on Friday is expected to be on the release of key U.S. non-farm payrolls data for August, which should give further clues on U.S. economic health.

(Reporting by Jessica Mortimer; Editing by Swaha Pattanaik) Keywords: MARKETS STERLING/CLOSE

tf.TFN-Europe_newsdesk@thomsonreuters.com

cmr

COPYRIGHT

Copyright Thomson Financial News Limited 2008. All rights reserved.

The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.