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Small base rate cut strengthens sterling

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by David Masters
Small base rate cut strengthens sterling

Last week’s cut to the base rate of interest has rallied the strength of the pound against key currencies.

The Bank of England cut rates by 0.5% to 1.5%, the lowest for over 300 years, but not as drastic a cut as some analysts had anticipated.

As a result, the pound strengthened against the US dollar and the Euro, up to €1.12 or $1.52.

This is sterling’s highest level against the euro in nearly a month. During the last month, the pound fell so low as to almost achieve parity with the euro, hitting a bottom rate of €1.02.

Concerns about the European economy and the prospect of potential rate cuts by the European Central Bank have both helped the pound’s rally against the euro.

Foreign exchange website FairFX said sterling would continue to gain value, with Europe and America beginning to look as vulnerable as other economies.

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News posted: January 12, 2009

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