Pound Drops


The pound fell for a second day against the dollar as minutes from this month's Bank of England policy meeting showed members decided an interest-rate increase wasn't ``urgently'' required to keep inflation contained.

The British currency also traded near the lowest level in a week versus the euro as traders judged accelerating inflation will erode economic growth. David Blanchflower was the sole central bank policy member to back a rate change, voting to cut rates to 4.75 percent from 5 percent, the June 5 minutes showed. Governor Mervyn King said yesterday the path of borrowing costs is ``uncertain.''

The pound slid as much as 0.4 percent to $1.9484 and was at $1.9488 by 11:14 a.m. in London, from $1.9568 yesterday. It was also at 79.39 pence per euro, from 79.25 yesterday. The pound fell to 79.56 pence yesterday, the lowest since June 9.

The pound may fall to $1.94 in the next week and may also trade between 78 pence and 80 pence per euro, Mialich predicted. That compares with an average forecast that the currency will trade at about 79 pence by the end of the third quarter, according to the median of 19 estimates compiled by Bloomberg News.

They decided a rate increase wasn't ``urgently'' required to keep inflation expectations in check and may appear to exaggerate the panel's concerns about prices. Blanchflower argued evidence of slowing growth ``more than outweighed'' the news about short-term inflation.

The U.K. currency may fall to a record low against the euro during the next three months on speculation the central bank will resist lifting borrowing costs, Naeem Wahid, a strategist in London at HBOS Plc, Britain's largest mortgage lender, said yesterday. ``We're looking for downside risk in the short to medium term largely due to weakness in the economic data.''


TradingEconomics.com, Bloomberg
6/18/2008 6:50:56 AM