By Daniel Tilles Sept. 22 (Bloomberg) -- The pound has a less than one-in- five chance of weakening to parity with the euro by the end of the first quarter, implied volatility from options trading monitored by Bloomberg showed. The likelihood was 17.2 percent as of 3:50 p.m. in London, when the British currency traded at 90.34 pence per euro, the options showed. BNP Paribas SA said last week the pound may reach parity with the euro in the first quarter. Citigroup Inc. forecast yesterday it would “exceed” parity. The pound dropped 2.5 percent versus the euro since Sept. 14, the day before Bank of England Governor Mervyn King said policy makers are considering lowering the rate they pay financial institutions to hold reserves at the central bank. Goldman Sachs Group Inc. today said investors should sell the euro against the pound with a target of 84 pence. Reaching parity “would be a step too far and would likely require a serious overshoot,” said Lee Hardman, a currency strategist in London at Bank of Tokyo-Mitsubishi UFJ Ltd. “We’d prefer to look for opportunities to short euro-pound at current levels” as it “appears most vulnerable to a correction lower. There is some scope for the pound to rebound in the near term.”

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