The Bank of England thinks that a strong pound is no reason to leave interest rates unchanged.

ECONOMIST: The economy

Yet some of the recently announced redundancies, at British Steel, for example, and at Vickers, a defence company, are signs that the high pound and the past year's increases in interest rates are beginning to take their long-forecast toll on manufacturing industry.

ECONOMIST: The economy

Since Paul Volcker ratcheted U.S. interest rates above 20% in the early 1980s to pound inflation below 10%, governments have kept up the pressure on prices.

CNN: QUIPPED ONE ANONYMOUS

Currency traders are assuming that lower inflation will enable the Bank of England to keep interest rates low for longer, which in turn makes the pound less attractive to investors.

BBC: Pound falls after surprise dip in inflation

The pound had also weakened slightly after the Bank of England on Thursday cut its base interest rate to 5.50%, from 5.75%, on growing signs that the U.K. economy was slowing.

FORBES: Magazine Article

It left interest rates unchanged after its meeting last week and earlier this week cited the pound as a reason for leaving rates on hold.

BBC: Pound hits four-year low

The pound was also boosted by a warning from Bank of England monetary policy committee member Andrew Sentance against delaying raising interest rates to tackle inflation.

BBC: Builders at work

Pound futures are trading at a discount to spot prices, a reflection of the fact that short-term interest rates are higher in London than they are here.

FORBES: In The Money