The U.K. pound slipped against the dollar and the euro, extending monthly declines, as consumer confidence held near the lowest level in three decades and stock markets fell across the world amid a deepening economic slump. The pound also fell versus Japan’s yen, paring its first monthly gain since July, as GfK NOP said more than 40 percent of British mortgage holders may see their loans exceed the value of their homes by year-end. Bank of England policy maker David Blanchflower said this week the recession will probably deepen ‘significantly.” The FTSE 350 Banks Index fell the most in more than five weeks as Lloyds Banking Group Plc said it hasn’t reached agreement on a government asset insurance program. “The recovery is likely to be pushed back and sterling can weaken further from here,” said Lauren Rosborough, a currency strategist in London at Westpac Banking Corp. “Sterling has gone a bit off the radar.” The pound weakened 1.3 percent to $1.4135 by 2 p.m. in London, leaving it 2.1 percent lower this week, and down 2.9 percent this month. It depreciated 3 percent to 136.81 yen, paring its gain since the end of January to 4.6 percent. The U.K. currency lost 0.3 percent to 89.34 pence per euro, for a decline of 1.4 percent in the past four weeks. The pound slumped 23 percent versus the euro and lost 26 percent against the dollar in 2008 as the economy slipped into its first recession since 1991. The currency may trade between $1.41 and $1.50 in the next week, Rosborough said. An index of U.K. consumer confidence rose two points to minus 35 in February, staying near a three-decade low, GfK said today in a separate report. The survey of 2,001 people was conducted between Feb. 6 and Feb. 15. ‘Weakness to Come’ The benchmark FTSE 100 Index of stocks lost 3.6 percent as all the major European equity markets fell. Lloyds retreated as much as 30 percent, contributing to a 9 percent decline in the banking index, the most since Jan. 19. The government said yesterday it will insure U.K. incorporated deposit-takers with more than 25 billion pounds of assets against credit losses in return for a fee. The pound stayed lower after a government report showed the U.S. economy shrank in the fourth quarter at a faster pace than previously estimated. “There aren’t a lot of reasons to be buying the pound, and we’ve got some more weakness to come,” said Paul Bednarczyk, a currency strategist in London at 4Cast Ltd., which counts central banks among its subscribers. “The data hasn’t been particularly encouraging.” U.K. government bonds rose, with the yield on the 10-year gilt declining 12 basis points to 3.52 percent, pushing the drop this month to 39 basis points. The 4.5 percent security due March 2019 climbed 1.01, or 1.10 pounds per 1,000-pound ($1,413) face amount, to 108.17. The yield on the two-year note dropped 10 basis points to 1.39 percent. Bond yields move inversely to prices. The difference in yield between the securities widened 20 basis points this week to 213 basis points, near the most since Feb. 13, indicating greater demand for shorter-dated notes, which are more sensitive to the interest-rate outlook and are perceived to be safer.

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