By Paul Dobson and Ron Harui Feb. 10 (Bloomberg) -- The U.K. pound fell against all 16 of its most-traded peers tracked by Bloomberg after the Bank of England cut its forecast for Britain’s gross domestic product and said inflation will undershoot its 2 percent target. Governor Mervyn King said it’s “far too soon” to say whether officials have halted their bond-purchase program as the central bank’s forecasts showed inflation will peak at about 3.3 percent before slowing as low as 0.9 percent. The euro pared a decline versus the dollar on speculation European Union nations will help Greece manage its budget deficit. The currency posted its biggest gain against the dollar yesterday before talks between EU leaders that will include discussion of Greece’s crisis. “The report is solidly sterling negative,” said Paul Robson, a foreign-exchange strategist at Royal Bank of Scotland Group Plc in London. “The inflation outlook is much more dovish than the market had expected. It suggests any monetary-policy tightening is off the agenda for at least a year.” The U.K. currency dropped 0.5 percent to $1.5640 as of 7:09 a.m. in New York from $1.5719 yesterday, and traded at 88.07 pence per euro, from 87.77 pence. The euro was at $1.3790, little changed from $1.3797 yesterday. European Union leaders will discuss Greece at a summit tomorrow in Brussels, an EU official told reporters today on condition of anonymity. German Finance Minister Wolfgang Schaeuble told lawmakers that options for helping Greece extended beyond loan guarantees, according to an official who attended the briefing today in Berlin. Stagnating Economy “We don’t see any long-term positives for the euro even if we do get a bailout,” Simon Grose-Hodge, a strategist at LGT Group in Singapore, said today in a Bloomberg Television interview. “It’s going to come at the price of even greater austerity measures. The long-term prognosis is for stagnating growth in Europe.” The dollar earlier strengthened against the euro before the release of Federal Reserve Chairman Ben S. Bernanke’s testimony to Congress about withdrawing stimulus funds. Bernanke’s testimony, to be released at 10 a.m. in Washington, will detail the Fed’s plan to unwind emergency liquidity programs as the economy shows signs of recovery. He was originally scheduled to speak before the House Financial Services Committee. The hearing was postponed due to adverse weather and hasn’t been rescheduled. Trade Deficit The U.S. currency traded at 89.70 yen from 89.69 yen. The yen was unchanged at 123.75 per euro, after earlier falling to 124.27, the lowest level since Feb. 4. The Australian and New Zealand dollars weakened after a report showed China’s exports and imports fell in January from the previous month. China’s customs bureau reported exports declined a seasonally adjusted 5.5 percent last month from December, while imports dropped 0.9 percent. “The Chinese data was much weaker than expected and markets are taking that as a warning signal,” said Henrik Gullberg, a currency strategist at Deutsche Bank AG in London. Australia’s dollar fell 0.1 percent to 87.75 U.S. cents, and New Zealand’s currency lost 0.1 percent to 69.52 cents. Benchmark interest rates of 3.75 percent in Australia and 2.5 percent in New Zealand compare with as low as zero in the U.S. and 0.1 percent in Japan, making the South Pacific nations’ assets attractive to investors seeking higher returns. The risk in such trades is that currency market moves will erase profits. --With assistance from Yoshiaki Nohara in Tokyo and Susan Li in Hong Kong. Editors: Justin Carrigan, Keith Campbell To contact the reporters on this story: Ron Harui in Singapore at +65-6212-1161 or rharui@bloomberg.net; Paul Dobson in London at +44-20-7673-2041 or pdobson2@bloomberg.net To contact the editor responsible for this story: Justin Carrigan at +44-20-7673-2502 or jcarrigan@bloomberg.net

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