The risks in the region have pushed the euro to its weakest in 3 1/2 years against the pound. Gilts have risen as investors sought the relative safety of U.K. government debt, pushing the 10-year gilt yield to a record low. The yield was at 1.917 percent as of 8:42 a.m. in London, after dropping to 1.881 yesterday, the lowest since Bloomberg began compiling the data in 1989.

“The background for the BOE's decision is a euro crisis which is looking even more of a downside risk, and a U.K. economy in recession,” said Victoria Cadman, an economist at Investec Securities in London. “Even an inflation hawk would be fairly worried about that.”

Consumer-price growth accelerated to 3.5 percent in March, remaining above the Bank of England's 2 percent target for a 28th month, and inflation concerns are mounting.

Deputy Governor Paul Tucker said April 18 the “uncomfortably above target” rate could hold above 3 percent into the second half of the year. Policy maker Adam Posen ended a push for further stimulus last month and minutes of that meeting said there was a risk that inflation may “fall less rapidly” than projected.

Eoin Treacy's view The UK benefitted from being among the first countries to devalue their currency. However, as the USA and now Europe have come under pressure the Pound has outperformed, hitting a three and a half year high against the Euro today. For an economy struggling with an impaired financial system, a weak housing market, meagre growth prospects and market enforced austerity the relative strength of the Pound is an additional headache. The currency, having just broken upwards against the Euro, is becoming somewhat overextended relatiev to the 200-day MA but a clear downward dynamic would be required to check momentum in the short term.

UK 10-year Gilt yields broke downwards to new lows yesterday but failed to sustain the move today, pushing back up to the 2% area. A clear downward dynamic will be required to question potential for some additional upside. A sustained move back above the 200-day MA would be required to question the consistency of the decline.

The FTSE-100 has been confined to a large volatile range for much of the last couple of years. The Index has held a progression of higher reaction lows since October and retested the psychological 6000 area in March. It has pulled back over the past six weeks and found at least short-term support in the region of 5500 this week. Some scope for a relief rally exists but a sustained move above 5800 will be required to suggest a return to demand dominance beyond the very short term.