Sterling fell to 72 pence per euro for the first time in 4-1/2 years on Wednesday after Bank of England minutes backed expectations that interest rates will be cut before too long. Two of the nine policymakers voted for a cut this month, with the rest backing the on-hold decision, as expected.
Analysts were surprised though that John Gieve, the normally hawkish deputy governor, was one of the dissenters. Taken together with recent signs of slowing in Britain's housing market and a dovish BoE inflation report last week, the minutes were seen as backing the case for a rate cut from 5.75 percent early next year or even as soon as December.
The euro rose to a 4-1/2-year high of 72.07 pence, edging up towards a record high of 72.55 pence set in mid-2003. By 1455 GMT, sterling was down 0.3 percent at $2.0592. It also fell 1 percent against the low-yielding yen to 222.53 yen, hitting levels not seen since the sharp spike up in risk aversion at the height of the credit market crunch in mid-August.