LONDON: The pound fell to a historic low point against the euro in early trading on Wednesday as the Bank of England prepared to begin a meeting at which it was expected to cut interest rates.
The pound dropped to an all-time low of ?1.25 shortly after 7 am GMT. It later stood at ?1.2509, compared with ?1.2536 in New York late on Tuesday.
Many economists expect the Bank of England s rate-setting monetary policy committee to cut its key lending rate by a quarter of a percentage point to 5 percent on Thursday at the conclusion of a two-day meeting.
The BoE was widely forecast to trim British interest rates as it monitors fresh evidence of a housing market downturn amid the global credit crunch.
The European Central Bank was meanwhile predicted to keep borrowing costs in the 15-nation eurozone at 4 percent in a separate monetary policy announcement on Thursday.
Traders and currency speculators generally prefer to invest in countries where interest rates are expected to trend higher, so they can potentially reap higher returns.
The US Federal Reserve has slashed interest rates by three full percentage points to 2.25 percent since September to shore up the economy, which is facing a severe subprime or high-risk housing slump.
The Bank of England had refrained from cutting rates to boost growth in February and March, as it sought to keep a lid on rising inflation but the latest data shows growing weakness in the housing market.
British Prime Minister Gordon Brown had insisted on Tuesday that Britain was better prepared than other countries to resist an economic slowdown. -AFP
