MercoPress. South Atlantic News Agency

British pound moving closer to parity with the Euro

The British pound moved ever closer to parity with the Euro on Wednesday amid growing expectations of more deep cuts in UK interest rates. Minutes of the Bank of England's latest meeting revealed rate-setters considered even larger cuts than the 1% move two weeks ago, bringing rates to 2% and equalling the all-time low.

This left the pound falling to yet another record low below 1.08 Euros, giving a fresh reason to dump sterling and ruin British overseas travellers' plans. Pressure on the pound was increased by more economic woes as claimant count unemployment topped one million for the first time in eight years - jumping at its fastest monthly rate since 1991. Many tourists are already facing a one-to-one rate after high street charges and commission are taken into account. Currency markets were panicked after the Bank's Monetary Policy Committee (MPC) said a deeper rate cut could be justified by the scale of the recession danger facing the UK. "Financial markets had priced in a cut of 100 basis points and there was a risk that going further could cause an excessive fall in the exchange rate," the minutes said. Wednesday's comments make further UK reductions virtually certain. Borrowing costs in the Euro-zone stand higher at 2.5%, boosting the Euro against the pound. Sterling enjoyed better fortunes against the dollar in the wake of Tuesday night's historic interest rate cut from the US Federal Reserve. The pound rose as high as 1.57 against the greenback as the Fed slashed rates to between 0% and 0.25% to stave off a prolonged US slump. The currency later eased back but still stands above the six-and-a-half-year low below 1.45 seen earlier this month when the Bank of England last cut rates.