Pound hits new trough vs. euro as BoE cuts seen ahead

LONDON (Reuters) - Sterling hit a record low versus the euro on Wednesday on expectations that high inflation will keep euro zone rates on hold for now, while the Bank of England will continue cutting borrowing costs to boost growth.

Euro zone inflation was unexpectedly revised up to an annual 3.6 percent in March, far above the European Central Bank's 2 percent ceiling, in contrast with Tuesday's news of a smaller than expected increase in British consumer prices last month.

Wednesday also brought a harbinger of possible future softness in the economy, with revised February data showing the first increase in the number of people claiming unemployment benefit in 17 months, even if the claimant count retraced lower in March.

"The Bank of England can concentrate on growth, which is slowing...and cut rates more. I think the market hasn't priced in enough easing and sterling almost certainly has further to fall against the dollar and the euro," said Rob Carnell, chief international economist at ING.

By 3:05 p.m., the euro was at a fresh historic peak of 80.76 pence, up 0.7 percent on the day and nearly 10 percent since the start of the year.

However the pound eked out a gain versus a broadly weak dollar which was pressured by weaker than expected U.S. housing data and worries about upcoming earnings releases from major companies. It rose to $1.9758.

Expectations for further British rate cuts were boosted on Tuesday after a survey showed the sharpest fall in like-for-like retail sales since July 2005, and a measure of house price movements fell to a 30-year low.

In a further sign of economic gloom, JJB Sports (JJB.L) posted a bigger-than-expected 28.5 percent fall in full year profit on Wednesday, and said it would close 72 stores and axe 800 jobs.

The BoE has already cut rates three times since December to 5 percent and is expected to ease by a further half a percentage point by year-end <BOE/INT>.

(Reporting by Toni Vorobyova; Editing by Gerrard Raven)