The British pound weakened against the euro as traders scaled back bets on when the Bank of England will raise borrowing costs. The U.K. currency was within a cent of the lowest level since April 5 against the dollar as short-sterling futures rose. A report tomorrow will show inflation accelerated in April, according to a Bloomberg survey. Minutes from the Bank of England’s May 5 meeting will be released on May 18 and will show how policy makers voted as they held rates at 0.5 percent. Home sellers raised asking prices to the highest since 2008 this month, data showed today. “The data this week should continue to paint a picture that the U.K. is experiencing a persistent inflation overshoot and very weak activity, and as a result the Bank of England is in a difficult position,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “We expect one rate hike toward the end of this year.” The pound fell 0.5 percent against the euro to 87.62 pence per euro as of 4:15 p.m. in London. It rose 0.3 percent against the dollar to $1.6237. Sterling reached $1.6147 on May 13, the weakest since April 5, when it touched $1.6091. The U.K. currency depreciated more than 1 percent against the dollar last week amid weak economic data. Short-sterling futures rose, pushing the implied yield on the contract expiring in March 2012 down two basis points to 1.22 percent, indicating investors are pushing back betting on a later rate increase. Market Moved ‘Aggressively’ “The market has moved already quite aggressively to push back the timing and the scale of Bank of England rate hikes, so there’s limited further downside for the pound,” said Hardman. U.K. consumer prices in April probably rose 4.1 percent from a year earlier, compared with 4 percent the previous month, according to the median estimate of 32 economists in a Bloomberg survey before the data is released tomorrow. Three of the Bank of England’s nine policy makers voted for a rate increase in April to tame inflation, while one called for an increase in the bank’s asset-purchase program from the current 200 billion pounds. The majority, including Governor Mervyn King, voted to leave policy unchanged, minutes of that meeting showed. “The most important thing for the market right now is the timing of the Bank of England rate hikes, so there will be a focus on the inflation data tomorrow and on the minutes later this week,” said You-na Park, a currency strategist at Commerzbank AG in Frankfurt. Cameron Austerity U.K. growth is slowing as Prime Minister David Cameron’s coalition government seeks to reduce a fiscal deficit of almost 10 percent of gross domestic product by raising taxes and cutting public spending. Average asking prices for homes rose 1.3 percent from the previous month to 238,874 pounds ($388,700), London-based Rightmove Plc, the operator of the U.K.’s biggest property website, said in a report today. From a year ago, prices are up 0.7 percent. Rightmove said public holidays in April limited the supply of property for sale. U.K. government bonds fell, pushing the yield on the 10- year gilt up two basis points to 3.39 percent. Two-year yields were one basis point higher at 1 percent. To contact the reporter on this story: Emma Charlton in London at echarlton1@bloomberg.net. To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net.

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