Pound falls on signs of rate cuts

A string of negative economic news has put pressure on sterling

Sterling has hit another record low against the euro following weak jobless figures and signs that the Bank of England is set to cut rates further.

The pound hit a low of 1.0756 euros before recovering to 1.0772 euros.

Meanwhile the dollar fell to a 13-and-a -half year low against the yen, of 87.79 yen, after the US Fed cut its key interest rate to an all-time low.

Many analysts had expected a cut to 0.5%, rather than the Fed's move to between zero and 0.25%.

The US interest rate is now the lowest among developed countries.

"This clearly hadn't been priced into markets with the dollar tumbling as a result," said James Hughes, a currency analyst at CMC Markets.

The dollar had fallen to $1.4330 against the euro.

'Very negative'

At the beginning of December the Bank of England reduced its key interest rate to 2% from 3%, and minutes from its rate-setting meeting showed it considered an even deeper cut.

Separately, latest figures showed that the number of people out of work in the UK had risen to the highest level since June 1999, while the number of those claiming unemployment benefit rose above one million.

"Sterling is coming under pressure after the claimant count figures were well above market expectations," Ian Stannard at BNP Paribas in London.

"It shows the UK is moving toward recession and this is very negative for sterling".