Pound Has First Annual Drop Against Euro Since 2004


The pound posted its first annual drop in three years against the euro on speculation the Bank of England will keep cutting interest rates while the European Central Bank stays on hold.

The British currency had its biggest decline in 4 1/2 years this month, dropping 3.1 percent, as traders bet the central bank will lower interest rates again to counter a housing-market slowdown and a global credit squeeze. Futures suggest the ECB will keep interest rates at a six-year high amid policy makers' concern about the inflationary threat to the economy.

Against the European common currency, the pound has fallen 9 percent this year, dropping to a record 73.89 pence this month. It pared the loss today, rising 0.7 percent to 73.28 pence as of 2:15 p.m. in London, from 73.78 late on Dec. 28.

The U.K. currency climbed to $2.0076, from $1.9964, heading for a 2.5 percent annual gain.


TradingEconomics.com, Bloomberg
12/31/2007 7:32:15 AM