U.K. Pound Recovers, Euro Gains

Days ahead of a vital election in Greece, the Bank of England has unveiled plans for a new liquidity mechanism to stanch the contagion from a potential Greek euro exit. The pound dropped 0.3% against the dollar on Friday with the euro jumping to the day’s high of £0.8152 as investors learned of the emergency liquidity measures. The Bank of England’s first auction will offer six-month loans to British banks for collateral, according to The Wall Street Journal. The announcement suggests that the Bank might perform an additional round of quantitative easing, a move welcomed by some analysts. “It remains to be seen how effective these two measures will be, and in the meantime we believe there is a strong argument for augmenting them with more [quantitative easing],” said Simon Hayes, an economist at Barclays in London.