The Sterling Falls Even Further Against The Dollar On UK Woes

The British pound fell to a record low against the yen and the weakest since 2001 versus the dollar on concern the U.K. recession will deepen, supporting the case for the Bank of England to cut interest rates further. Sterling declined for a fourth day against the euro, the longest stretch since the end of last year, before the BOE releases the minutes of its Jan. 8 meeting at which it reduced its benchmark rate to a record low 1.5 percent. 'The BOE minutes are due tonight and one might expect dovish tones to dominate,' Greg Gibbs, director of foreign- exchange strategy in Sydney at ABN Amro Australia Ltd., wrote in a research note today. The pound is likely to extend its decline toward a 'minor support' level at its 2001 low against the dollar, he said. The GBP/USD is currently trading at $1.3735 as of 8:40am, GMT.

The euro may fall 15 percent against the dollar by mid-year as European banks restrict lending and sovereign bond spreads widen due to the deepening global economic slowdown, BNP Paribas SA said. The 16-nation currency may 'undershoot' the bank's forecasts and touch $1.10 in the second quarter, a level last seen in September 2003, said Hans-Guenter Redeker, global head of foreign-exchange strategy at France's largest bank BNP. The European currency is heading for its third monthly loss after Standard & Poor's downgraded the sovereign credit ratings of Spain and Greece and lowered its outlook for Ireland to negative as government measures to stem the global financial crisis widen budget deficits. The EUR/USD is currently trading at $1.2920 as of 9:05am, GMT.

President Barack Obama's economic team is pushing to complete a bank-rescue plan that can be twinned with the $825 billion stimulus package being negotiated with Congress to alleviate the rapidly deepening financial crisis. While full details of the rescue haven't been settled yet, people familiar with the deliberations said the package is likely to include a $50 billion-plus program to stem foreclosures, fresh injections of capital into the banks and steps to deal with toxic assets clogging lenders' balance sheets. Officials 'feel like they need to move quickly to provide some sense of calmness and assurance to the market that the government isn't going to let this problem get out of hand,' said John Douglas, a partner at the Paul, Hastings, Janofsky & Walker law firm and a former general counsel at the Federal Deposit Insurance Corp.