December 21, 2007 / 3:19 PM / 11 years ago

Pound hits all-time low against euro

LONDON (Reuters) - The pound hit an all-time low versus the euro on Friday as expectations of an interest rate cut on the back of a slowing economy led investors to sell the currency.

File picture shows the pound coin. The pound hit an all-time low versus the euro on Friday as expectations of an interest rate cut on the back of a slowing economy led investors to sell the currency.REUTERS/file

The pound held near its lowest in more than a year and a half on a trade-weighted basis as news on Wednesday that the Bank of England’s Monetary Policy Committee was unanimous on this month’s rate cut firmed investor conviction that more monetary easing is imminent.

A raft of negative data in December has also led to increased speculation that the Bank will cut rates aggressively in 2008.

Consumer morale fell to its lowest in 12 years according to a GfK NOP survey released on Friday.

“Sterling has not had a good couple of days,” said Geraldine Concagh, economist at AIB Group Treasury in Dublin.

“All nine members of the MPC voted for a rate cut in December indicating another cut could happen in January. Consumer sentiment has cooled significantly fuelling fears that the economy is slowing down.”

By 3:14 p.m., the euro had risen as high as 72.56 pence according to Reuters data, the highest since its 1999 launch. The pound was steady versus the dollar at $1.9840.

On a trade-weighted basis the pound was at 99.00, just off its lowest since April 2006.

One bright spot for the economy came in the shape of stronger than expected retail sales in November. Sales were up 0.4 percent on the month, twice the increase forecast by analysts.

However AIB’s Concagh noted that much of this growth was down to internet sales and heavy discounting by retailers.

Trading is set to be thin on Monday and for the rest of next week as investors wind down over Christmas.

Reporting by Simon Falush, editing by Mike Peacock

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