19 June 2001, 11:50  Pound steady versus euro, falls against dollar

LONDON, June 19 - Sterling held steady against the euro on Tuesday as traders assessed comments made late on Monday by the Bank of England's Deputy Governor suggesting British interest rates may have now troughed.
Mervyn King told Cardiff Business School the central bank is ready to raise or lower interest rates as needed in coming months and will monitor inflation data very carefully after a surprise upsurge in May. The pound, however, shed about half a percent against the dollar, dented by the euro's weakness against the U.S. currency.
"King's comments support the view that rates are unlikely to go below 5.25 percent. This is supportive for sterling," said Ryan Shea, international economist at Bank One in London. "But the move down in cable (sterling/dollar) is a reflection of euro weakness." At 0733 GMT, sterling was pinned near the day's lows around $1.3980 , down over a cent from Friday's one-week peaks. But it stood near the day's highs against the euro around 61.20 pence , one pence below five-week lows set last week. King added that Britain's economy faced an unsustainable imbalance between demand and supply and warned that private consumption must grow more slowly to allow for a large increase in public spending.
Analysts said the comments were the first public recognition by a member of the BOE's policy committee that rates, which have been cut three times this year, may have now troughed. Sterling showed little reaction to a report by research group Cambridge Econometrics, which said British economic growth will slow to around two percent this year and the BOE may have to cut rates further to boost growth.
The debate on the UK's euro entry, was also seen remaining a focus after a report by the Financial Times that the government's economic assessment of whether Britain should join the euro is likely to remain shrouded in secrecy until the results are published, according to the Treasury. Chartists said sterling could remain in a tight range against the euro. "The price action since 62.10 (pence) is corrective in appearance," said the technical analysis team at Capital Managmement in London.
"Although the euro remains trapped in the 61.00/70 range, minor resistance at 61.70 should cap until a second decline unfolds to an ideal 60.60 target."

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