The pound touched the weakest in almost six months against the euro on speculation the European Central Bank will raise interest rates again this year before the Bank of England begins to tighten monetary policy. Sterling rose versus the dollar. U.K. jobless claims rose in March even as unemployment fell, while separate reports showed inflation accelerated in France and Germany, bolstering the case for higher ECB rates. “The BOE will sit tight until August at least,” said John Hydeskov, chief analyst at Danske Bank A/S in London, who lowered his three-month pound forecast against the euro to 92 pence from 89 pence today. “I’m still on the bearish side in terms of U.K. data and the pound will continue to slide.” The pound was little changed at 88.98 pence per euro at 1:06 p.m. in London after reaching 89.24 pence, the weakest since Oct. 25. It was 0.2 percent stronger at $1.6288. Sterling declined yesterday to $1.6227, the weakest level since March 5. Sterling dropped 0.8 percent against the euro and gilts rose yesterday as data showing inflation unexpectedly slowed and retail sales tumbled, stoking speculation that the Bank of England will raise interest rates later and at a slower pace than previously expected. U.K. jobless benefit claims rose by 700 from February, the Office for National Statistics said today in London. The median forecast of 22 economists in a Bloomberg News survey was for a drop of 3,000. Euro-Region Inflation German wholesale prices rose 10.9 percent in March from a year earlier, the most since October 1981. A separate report showed European industrial production gained 0.4 percent in February. French consumer prices, calculated using a harmonized European Union method, increased 2.2 percent from a year earlier after rising an annual 1.8 percent in February, Paris-based national statistics office Insee said today. That’s the biggest gain since October 2008. U.K. government bonds declined as the country sold 5 billion pounds of 2 percent notes maturing in 2016 today, part of 11.5 billion pounds of debt issuances planned for this week. Losses today pushed 10-year gilt yields five basis points higher to 3.74 percent. Two-year yields climbed four basis points to 1.29 percent. The U.K. Debt Management Office sold five-year notes at an average yield of 2.598 percent, attracting bids worth 1.82 times the securities offered. The yield on benchmark 4.75 percent five-year gilts maturing September 2015 climbed three basis points to 2.43 percent. Relative Rates The London-based central bank kept its main rate at an all- time low of 0.5 percent on April 7, while the ECB raised its main refinancing rate to 1.25 percent from 1 percent on the same day to contain above-target inflation. Sterling is little changed this year, according to Bloomberg Correlation-Weighted Indexes, which measure 10 developed-market currencies. It trails behind the euro’s 4.4 percent gain on speculation that the ECB would raise rates faster than the Bank of England. The pound has gained 4.4 percent against the dollar since Dec. 31 and weakened by 3.8 percent versus the 17-nation euro. Gross domestic product in the euro region rose 0.3 percent in the fourth quarter, the European Union’s statistics office in Luxembourg said on Feb. 15. The British economy contracted 0.5 percent in the last three months of 2010. U.K. gilts outperformed their German counterparts this year amid bets the Bank of England will keep rates at a record low to revive the economy. Gilts have lost 0.7 percent this year, according to indexes compiled by Bank of America Merrill Lynch. German bunds handed investors a loss of 2.7 percent. U.S. Treasuries have returned a negative 0.2 percent. To contact the reporter on this story: Lukanyo Mnyanda in Edinburgh at lmnyanda@bloomberg.net. To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net.

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