The British pound fell to a four year low against the Euro following evidence that the Bank of England could seriously lower interest rates next quarter.
According to the minutes from the last monetary policy meeting, even though the BoE left interest rates unchanged, two out of the nine members voted in favor of lowering rates. Gieve and Blanchflower were worried that more bad news may come as the money markets tighten further. Their prophecy seems to be already unfolding with today’s reports that UK mortgage lender Paragon could be collapsing if it fails to raise an extra GBP280 million. The UK economy has still not recovered from the Northern Rock debacle which led to the first run on a UK bank in more than 100 years. The market now expects the BoE’s next move to be a rate cut. Third quarter UK GDP is due for release tomorrow; the annualized pace of growth is expected to be 3.3 percent.