FACTBOX-A look at sterling milestones as euro parity looms

Mon Dec 22, 2008 3:29pm GMT

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(Reuters) - Sterling hit a record low against a basket of currencies on Monday, according to a Bank of England data series going back to 1990, taking it to within five pence of parity against the euro.

The pound sank to a record low against the euro on Thursday last week to its closest with parity since the single currency's inception a decade ago.

The pound has been battered by sharp reductions in interest rates to historic lows, a falling housing market and a growing perception that the economy will be among the biggest casualties from the global financial crisis owing to its high dependence on financial services, high consumer and household indebtedness, and deteriorating public accounts.

Sterling is now down 22 percent on the year to date against the euro and 25 percent against the dollar.

Following are some recent milestones for the pound, going back to 1990:

December 22, 2008 - As trading winds down ahead of the year-end holidays, the trade-weighted pound falls to 75.90, bringing that broad measure of sterling down 22 percent year to date.

The pound is also down 22 percent so far this year against the euro, on track for by far its largest ever annual fall against the 10-year old euro. Sterling, down 25 percent against the dollar, is on track for its worst year against the greenback in over a quarter of a century.

December 18, 2008 - Zero interest rates are a possibility and further capital injections may be required in the banking sector, Bank of England Deputy Governor Charles Bean says, mimicking similar comments from other Bank policymakers including arch dove David Blanchflower. The euro scales 95 pence to bring parity within sight.

December 4, 2008 - Bank slashes borrowing costs by 100 basis points to 2 percent, the lowest in over half a century. The ECB undershoots the Bank, cutting rates by 75 basis points to 2.5 percent. The euro climbs above 90 pence a week or so later, hitting a record high. The pound falls to $1.4467 against the dollar, its lowest since May, 2002.

November 6, 2008 - Bank cuts interest rates by stunning 150 basis points to 3 percent in a bid to shore up the flailing economy. By contrast the European Central Bank cuts by a much more modest 50 basis points. The euro climbs above 85 pence, a record high.

October 8, 2008 - The U.S. Fed leads a coordinated, global round of emergency interest rate cuts. China, the European Central Bank (ECB), the Bank of England and central banks in Canada, Sweden and Switzerland also cut rates. The Bank cuts rates by 50 basis points to 4.50 percent. Sterling falls to a two-and-a-half-year low of $1.7260 and the euro recovers ground to 79.39 pence.

October 8, 2008 - Chancellor Alistair Darling announces a plan for banks including up to 50 billion pounds to buy stakes and debt guarantees it expects to reach 250 billion.

October 3, 2008 - Bank of England extends the range of collateral it accepts at its weekly three-month cash auctions to include some triple-A rated corporate and consumer loans. It says it will offer 40 billion pounds at next auction on Oct 7 and will hold extended collateral weekly auctions until at least Nov 18.

September 29, 2008 - Nationalisation of mortgage lender Bradford & Bingley is announced. Spain's Banco Santander SA (SAN.MC) buys its retail deposits and branch network.

September 17, 2008 - Lloyds TSB Group (LLOY.L) agrees to rescue rival HBOS HBOS.L, scooping up the home loan lender in an all-share deal facilitated by the government.

September 15, 2008 - U.S. insurance giant American International Group says it is struggling for survival after losing some 92 percent of its value this year. A day later, the New York Fed says it will lend AIG up to $85 billion (£58 billion).

The unfolding crisis of the U.S. financial system pushes sterling as high as $1.8671 by the end of the month.

September 14, 2008 - U.S. investment bank Lehman Brothers bank files for bankruptcy protection after it fails to find a buyer, despite a weekend of intense activity coordinated by the Fed and Treasury. Wall Street rival Merrill Lynch agrees to be taken over by Bank of America as the 13-month long global credit crunch reaches its most intense phase.

April 21, 2008 - Bank of England announces plan to swap banks' risky mortgage assets for at least 50 billion pounds of government debt -- the so-called Special Liquidity Scheme. The euro climbs above 80 pence for the first time ever.

April 10, 2008 - Bank of England cuts interest rates by a quarter percentage point to 5.0 percent in what will prove to be its last move for six months.

March 17, 2008 - Bank of England makes emergency offer of 5 billion pounds of three-day loans to banks, which is nearly five times subscribed. Two days later UK financial authorities make rare statement to calm markets, saying they not aware of problems at any UK bank. The euro continues to rally against sterling, reaching just shy of 80 pence at the end of March.

March 16, 2008 - Labour's popularity falls to a 25-year low in opinion polls as Prime Minister Gordon Brown's ability to weather the growing domestic and international financial crisis is questioned.

March 14, 2008 - The U.S. Federal Reserve is forced to hammer out a rescue deal for Bear Stearns, which sees JP Morgan Chase take over its ailing Wall Street rival as the global credit crunch claims its highest profile victim to date. Sterling hits three-month high of $2.0397.

February 7, 2008 - Bank cuts interest rates by quarter percentage point to 5.25 percent. On Feb 17, Northern Rock is nationalised after funding crisis.

December 19, 2007 - Minutes showing that all nine of Bank of England's policymakers voted for December's interest rate cut fan expectations of more monetary easing and send sterling below the $2 mark for the first time in three months.

The euro later climbs to a record high around 72.60 pence before year end.

November 9, 2007 - Sterling rises as high as $2.1161 -- a 26-year peak -- with the dollar suffering from worries about the credit market crunch and expectations of hefty Fed rate cuts. But in the following weeks the pound retreats as investors bet that the Bank will follow the Fed in cutting rates -- which it does, in December.

The euro recovers from a one-month low around 69.15 pence at the start of the month and hits a four-year high above 71 pence later in the month.

October 30, 2007 - After more than two months of global credit market disruption and a deteriorating U.S. housing market, expectations of the second U.S. interest rate cut in less than six weeks send sterling to fresh 26-year peaks at $2.0694. More hawkish comments from Bank of England policymaker Kate Barker about the outlook for interest rates help the pound higher.

Sept 13, 2007 - News breaks that the global credit crunch has forced Northern Rock bank to seek emergency funding from the Bank of England. This triggers the first British bank run in more than a century. On September 17, Chancellor Alistair Darling says the government will guarantee all deposits at Northern Rock.

Euro rises to around 70.30 pence, its highest in nearly three years, starting a sharp rallying trend. Sterling slips to a one-month low vs the dollar around $1.9880.

Aug 21, 2007 - Barclays Bank (BARC.L) borrows 314 million pounds from Bank of England's standing lending facility, the first use of that penalty rate facility since credit crisis began earlier that month. Barclays taps central bank for emergency funds of some 1.6 billion pounds for a second time on August 30, citing a technical hitch in clearing system.

July 2, 2007 - Sterling rises above $2.0100 for the first time since 1981 as investors brace for a Bank of England rate hike later that week. The Bank duly hikes and the rally in sterling continues for most of the month, with the pound peaking at $2.0655. Later in the month the euro falls to a five-month low around 66.75 pence.

April 17, 2007 - Sterling breaks the $2 barrier, trading as high as $2.0084, its strongest since September 1992. The move is triggered by data showing a 3.1 pct jump in consumer prices in March, the highest since the series began in January 1997, forcing Bank Governor King to write a letter to Chancellor Brown explaining why inflation was more than a full percentage point away from the Bank's 2.0 percent target.

January 2007 - Sterling climbs above $1.9900 for the first time since September 1992, but is unable to reach the psychological $2 barrier. Euro falls to a four-year low around 65.35 pence.

December 2004 - Sterling climbs to $1.9550, its best showing in over 12 years, just as the euro hits record highs of $1.3670. The dollar falls broadly due to growing concerns over the widening U.S. current account deficit.

June 2003 - Bank of England Governor Eddie George retires after 10 years in the job, and is replaced by Deputy Governor Mervyn King. At his first meeting as chief, in July, King cuts rates by 25 basis points to 3.5 percent. Pound trades circa $1.62. Euro trades near a record high around 72.55 pence in late May.

September 11, 2001 - Attacks on New York and Washington. Sterling hits 6-month highs above $1.48 by early October as the greenback falls sharply versus most currencies.

June 2001 - Labour wins second term in office. Sterling trades circa $1.41, hitting a 15-year low that month of $1.3677. Euro trades just below 61 pence.

March 2000 - Nasdaq technology stocks bubble bursts. Sterling trades around $1.57. Euro trades around 60.00 pence.

January 1999 - Euro is launched. Euro/sterling launch rate is 70.80 pence, sterling starts the year at $1.6580 vs dollar.

Oct 1997 - Chancellor Gordon Brown sets down five tests that need to be passed for European Economic and Monetary Union. The tests included compatible interest rates and business cycles with the euro area, flexibility to deal with problems, favourable conditions for businesses, competitiveness, jobs and growth.

In addition, Britain would also have to meet the EU's economic convergence criteria ("Maastricht criteria") before being allowed to adopt the euro, including two years' membership of ERM II, of which the UK is currently not a member. Sterling/dollar hit a 10 month high around $1.7080.

May 6, 1997 - Bank of England is granted independence. The government transfers full operation responsibility for monetary policy to the Bank. At the same time Chancellor Gordon Brown raises interest rates by 25 basis points. Sterling rises to around 2.82 Deutsche marks, its highest in nearly five years.

May 2, 1997 - Labour wins the general election, returning to power for the first time in 18 years. Sterling trades at $1.6220 against the dollar, and fetches 2.80 marks.

Nov, 1995 - Sterling hits a record low of around 2.16 marks in November, according to Bank data, driven by broad mark strength. Deutsche mark hit a record high against the dollar at 1.37 marks in April 1995.

September 1992 - Sterling rises as high as $2.0100 from $1.70 six months earlier, only to plummet later in the month when Britain is forced out of the ERM. The pound drops 25 percent in just three months after speculative selling -- most famously from mega-investor George Soros -- forces Britain to detach itself from the ERM on the day dubbed Black Wednesday.

Sterling falls to around 2.51 marks, its weakest on BoE data going back to 1975.

February 1991 - Sterling/dollar climbs to $2.0045, breaking above $2 for the first time in a decade. The dollar comes under broad pressure, despite central bank intervention to support it, as markets focus on the widening yield differential with Germany. Sterling falls to 2.93 marks, a one-month low.

November 1990 - Margaret Thatcher resigns after 11 years as Prime Minister. Finance minister John Major wins leadership contest, taking over as leader of ruling Conservative party and premier. Sterling falls to around 2.89 marks, a five-month low.

October 1990 - Sterling joins Europe's Exchange Rate Mechanism (ERM), the precusror to a single European currency, with a band of six percent above or below a central rate of 2.95 German marks per pound. At a Rome summit, Prime Minister Margaret Thatcher resists move towards single European currency but finance minister John Major persuades her to end her opposition to British participation.

Sterling trades at around 3.03 Deutsche Marks, a two-month high.

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