Pound May Fall as Traders Trim Bets Bank of England Will Raise Rates Again

(Bloomberg) -- The U.K. pound may fall as investors
lower expectations the Bank of England will raise interest rates
again this year.

Interest-rate futures trading shows investors have scaled
back their forecasts for how high the U.K. central bank will lift
rates on concern borrowing costs at a six-year high of 5.75
percent will begin to slow economic expansion. A report today may
show industrial production growth slowed in June.


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Pound Rises Versus Dollar to 26-Year High on Rates View, Subprime Concern

(Bloomberg) -- The pound traded at its highest in 26
years against the dollar on speculation the Bank of England will
raise interest rates further this year while a slowdown in the
U.S. housing market keeps the Federal Reserve on hold.

The currency yesterday gained by the most in three months
after Standard & Poor's said it may cut ratings on $12 billion of
bonds backed by U.S. subprime mortgages. The pound has gained 3.5
percent against the dollar this year as investors bought the U.K.
currency to take advantage of the highest rates among the Group
of Seven industrialized nations.


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Vodafone weighs on FTSE before rate verdict

(Reuters) - Britain's top share index fell on Thursday as losses in heavyweight Vodafone and a widely anticipated rate rise by the Bank of England outweighed gains in miners.

Vodafone, which until recently was the favourite to win a pan-European iPhone deal with Apple, fell 1.3 percent after UK newspapers said rival O2, a unit of Spain's Telefonica, was poised to clinch a deal to be the exclusive network partner for the much-hyped phone in the UK.


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Dollar Is Near Record Low Against the Euro Before Interest-Rate Meetings

(Bloomberg) -- The dollar was near a record low
versus the euro and the weakest in 26 years against the pound
before two European central bank policy meetings tomorrow.

The Bank of England is forecast to raise borrowing costs
while the European Central Bank may signal future increases to
tame inflation. The dollar has dropped 3 percent against the euro
and 2.9 percent versus the pound this year on bets the Federal
Reserve will keep interest rates unchanged, dimming the allure of
U.S. assets relative to those in the euro region and U.K.


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Bank of England's Jenkinson Warns on Weaknesses Shown by Subprime Fallout

(Bloomberg) -- The U.S. subprime lending crisis has
shown weaknesses in risk controls which could affect the whole
financial system in the event of a bigger shock to deeper markets
such as corporate credit, a Bank of England official said.

``Recent distress in the U.S. subprime lending market'' has
``exposed weaknesses in risk management,'' Nigel Jenkinson, the
bank's executive director for financial stability, said today.
``In a more severe stress scenario, perhaps in a more significant
market such as corporate credit,'' the effect ``could have more
serious consequences for the financial system.''


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U.K. Pound Trades Near to Four-Month High Against Euro on Rate Outlook

(Bloomberg) -- The pound traded near the highest in
almost four months against the euro on speculation investors will
keep raising bets on higher interest rates in Europe's second-
largest economy.

The currency has gained 0.8 percent versus the euro this
week as minutes of the Bank of England's June policy meeting
yesterday showed Governor Mervyn King and three other policy
makers backed higher borrowing costs. That prompted HSBC Plc and
JPMorgan Chase Co. to bring forward their forecasts of the next
interest-rate increase.


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U.K. Mining Stocks Gain, Led by Shares of Vedanta; Tesco, Retailers Fall

(Bloomberg) -- U.K. mining stocks climbed, led by
Vedanta Resources Plc and BHP Billiton Ltd., after copper rallied
on concern strikes in South America will disrupt production.

Tesco Plc and William Morrison Supermarkets Plc led retailers
lower after minutes showed the Bank of England voted five to four
to keep interest rates unchanged. British Airways Plc rose after
Standard & Poor's lifted its credit rating for the airline. Man
Group Plc gained after assets for its AHL fund increased.


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U.K. Pound Gains Before Bank of England Minutes Back Case for Higher Rate

(Bloomberg) -- The pound rose to the highest in more
than a week against the dollar on speculation the minutes of the
Bank of England's last meeting will reinforce the case for higher
interest rates.

Since the June 7 meeting, Governor Mervyn King and policy
maker Paul Tucker have again expressed concern about inflation,
underpinning expectations of an increase in borrowing costs. The
BOE will release the minutes on June 20. The pound also gained to
near an 11-year high versus the yen, as accelerating house prices
added to the case for higher rates.


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Bank of England Raises Concern About Lenders Easing Credit Conditions

(Bloomberg) -- The Bank of England said it's
concerned that lenders are easing credit restrictions as financial
companies compete to benefit from the fastest global growth in
more than three decades.

``Lenders reportedly continued to compete aggressively for
business on non-price terms, driving lending standards down
further,'' the U.K. central bank said in its quarterly bulletin
today. As a result of lower standards, the quality of covenants,
loan conditions that give lenders added protection, is also
deteriorating, the bank said.


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Pound Set for Weekly Gain on Speculation Bank Will Need to Raise Rates

(Bloomberg) -- The pound advanced, headed for its
first week of gains in three, on speculation the Bank of England
will need to keep raising interest rates to slow the economy.

BoE Governor Mervyn King this week said the bank ``may need
to take further action'' to contain inflation, even after it
boosted the main lending rate to a six-year high. Data showing
that inflation slowed last month may not change the direction of
bank policy. Policy maker Paul Tucker today said a pickup in money
growth is an ``amber light'' on future inflation.


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U.K. Pound Advances on View Further Rate Increases May Spur Carry Trade

(Bloomberg) -- The pound rose versus the dollar after
Bank of England Governor Mervyn King signaled he may raise
interest rates again, prompting speculation the currency will
continue to benefit from so-called carry trades.

The U.K. currency climbed for the first day in five, rallying
from its lowest in two months, after King said late yesterday the
BOE ``may need to take further action'' to contain inflation. The
bank has raised rates four times since August to a six-year high,
improving the allure of U.K. assets.


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U.K. Pound Declines Against Dollar on Interest Rates, Bond Sell-Off

(Bloomberg) -- The U.K. pound dropped against the
dollar for a third day, heading for a weekly decline, after the
Bank of England kept interest rates unchanged at its monthly
meeting yesterday.

The pound fell as a global sell-off in bonds helped the
dollar appreciate against 14 of the 16 most-traded currencies. It
slumped the most in three months versus its U.S. counterpart
yesterday after the Monetary Policy Committee, led by Governor
Mervyn King, kept the Bank Rate at 5.5 percent, as predicted by 58
of 62 economists in a Bloomberg News survey.


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Euro hits 7-week low vs dlr, FOMC minutes eyed

(Reuters) - The dollar has recovered in May after weakening for the first four months of the year as investors have slashed their expectations of a cut in U.S. interest rates. The implied chance of the Fed cutting rates by 25 basis points by 2008 is now less than 50 percent, down from earlier in the year when traders priced in two cuts.




Some economists are even beginning to wonder if the Fed will eventually have to raise rates, joining the European Central Bank, the Bank of England and the Bank of Canada, which are all expected to tighten policy at least once more to contain inflation pressures.


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U.K. Pound May Advance on Expectations of Higher Rates, Acquisitions

(Bloomberg) -- The U.K. pound may rebound from a six
week low against the dollar on expectations the Bank of England
will keep raising interest rates and foreign companies step up
acquisitions of U.K. rivals.

Investors are sticking with bets the rate setting monetary
Policy Council will increase interest rates twice more this year.
U.K. insurer Friends Provident Plc may receive a bid from rival
Axa SA, the Observer reported, spurring speculation more British
companies will become takeover targets.


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U.K. Pound May Decline as Industry Survey Shows House Prices Are Cooling

(Bloomberg) -- The U.K. pound may decline after an
industry survey showed house-price inflation slowed this month,
easing pressure on the Bank of England to keep raising interest
rates this year.

The pound fell for a fourth week against the dollar, its
longest losing run in 15 months, as investors scaled back
expectations for rate increases this year. The pound extended its
drop after a report last week showed sales at U.K. retailers
unexpectedly fell in April.


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