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Euro soars to new record high against pound

Friday, January 11, 2008

LONDON (Thomson Financial) - The euro soared to a new record high against the pound as the dust settled on the Bank of England's decision to leave interest rates on hold yesterday, with the market increasingly convinced that rates will fall in February.

European Central Bank president Jean-Claude Trichet by contrast is sticking to his hawkish mantra, stressing the risks to inflation from higher wage deals and suggesting that rates are, if anything, more likely to go up than down.

"Contrasting interest rate outlooks are a key factor driving euro/sterling higher," said Robert Howard at Thomson IFR Markets.

"The BoE MPC is expected to cut the UK base rate by 25 basis points to 5.25 pct next month, with further cuts forecast through year-end. By contrast, the ECB is not expected to cut the refinance rate," he said.

Trichet yesterday said the ECB stood ready to act "preemptively" to counteract the risks to inflation.

The euro this morning hit a record high of 0.7585 against the pound. At 7.58 am, it was trading just below that level at 0.7580 stg.

Posted by MOHAMED SAID at 12:31 AM  


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