The U.K. pound dropped against the euro for the first time in three days as stock losses encouraged investors to seek the safest assets and a drop in house prices added to signs the recession is deepening. The pound also snapped a four-day gain versus the dollar as the FTSE 100 Index lost as much as 1.6 percent and equity markets dropped across Europe. It also weakened after a government report showed house prices dropped in January for a seventh month and before tomorrow’s jobs data, which economists say will show unemployment increased last month. “It’s a case of sterling reacting to stock-market movements,” said Jeremy Stretch, a senior currency strategist at Rabobank International in London. “That’s undermining sterling. The pound’s now one of the risk-sensitive currencies.” The pound fell as much as 0.6 percent to 92.74 pence per euro and was at 92.62 pence by 2:23 p.m. in London. The U.K. currency decreased as much as 0.7 percent to $1.3966 and was at $1.3988 after reaching $1.4138 earlier. It increased yesterday to $1.4229, the highest level since March 6. The currency may extend losses before tomorrow’s employment report, and investors should use any gains to $1.42 and 91 pence per euro as opportunities to sell the pound, Stretch said. U.K. house prices dropped 11.5 percent in January from a year earlier, the Department for Communities and Local Government said today in London, adding to evidence the economic slump is worsening. Pound in 2008 The pound fell 23 percent versus the euro and 26 percent against the dollar last year as the economy slipped into its first recession since 1991, prompting the Bank of England to cut the benchmark interest rate to a record low of 0.5 percent. The central bank is scheduled to release the minutes of its last policy meeting tomorrow. The number of people receiving jobless benefits may have climbed by 84,800 last month after rising in January to the highest level since July 1999, according to the median forecast of 20 economists surveyed by Bloomberg News. The Office for National Statistics in London is scheduled to release the data tomorrow. U.K. government bonds dropped, with the yield on the 10-year gilt rising one basis point to 3.04 percent. The 4.5 percent security due in March 2019 declined 0.05, or 50 pence per 1,000- pound face amount, to 112.50. The yield on the two-year note fell one basis point to 1.44 percent. The UK Debt Management Office, which manages debt offerings by the government, sold 1.2 billion pounds of gilts maturing 2025 at an average yield of 3.614 percent. Demand for the securities exceeded supply 1.57 times, the DMO said. British government bonds earned investors 0.6 percent this year, compared with a 3.2 percent loss for Treasuries, according to Merrill Lynch & Co.’s U.K. Gilts and U.S. Treasury Master indexes.

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