Euro hits 10-month low against pound

THE euro hit a 10-month low against the pound yesterday, amid speculation that the European Central Bank will soon cut interest rates.

Sterling was ½p up at 66.24p against the euro. Traders said the pound would have been even stronger, were it not for more signs that UK rates are also going to fall.

The speculation followed the Confederation of British Industry saying that UK manufacturing order books were at their weakest since October 2003.

However, many analysts believe that the battered euro will soon claw back lost ground in the coming months.

They claim speculation over the future of the single currency will die down and the focus will switch back to the global slowdown and to America's yawning current account and budget deficits, putting fresh pressure on the dollar.

In its monthly industrial trends survey, the CBI added that higher oil and metals prices threatened to make life even worse for producers.

The CBI also said that manufacturers reined in their output expectations for the fourth month in a row.

Julian Jessop of Capital Economics said the survey suggested the sector was in recession.