Pound moves closer to euro parity amid rate cut bets

The pound has weakened further against the euro, moving closer to parity with the continental currency for the first time amid bets that the Bank of England will lower the base rate of interest from its current level of two per cent to help the economy.

Additionally, the sterling's money exchange rate fell against the dollar after John Gieve, the deputy governor of the Bank, told the BBC that policymakers require new instruments in order to tackle the current economic slowdown.

The news agency cited Mr Gieve as suggesting the Bank has relied too heavily on cuts in interest rates to control the country's economy.

He also expressed doubts as to whether the Treasury would get back the entirety of the £37 billion it has poured into banks.

The Bank's monetary policy committee is set to take its next decision on whether to raise, lower or maintain the base rate of interest on January 8th 2009.