The pound slumped versus the dollar after a report showed U.K. jobless claims surged more than economists predicted in May and wage growth slowed, damaging the case for the Bank of England to raise interest rates. U.K. government bonds fell as the Office for National Statistics said jobless-benefit claims jumped 19,600 from April, when they rose a revised 16,900. The median forecast of 22 economists in a Bloomberg News survey was an increase of 6,500. Sterling held its gains against the euro as the region’s finance ministers struggled to break a deadlock on aid for Greece. “The employment data does emphasize that austerity is here and now,” said Neil Jones, head of European hedge-fund sales at Mizuho Corporate Bank Ltd. in London. “Sterling is being sold on the back of it on anticipation that the BOE will need to revisit any plans for raising interest rates. The Monetary Policy Committee would not want a situation where they’re increasing interest rates in an economy where unemployment is rising.” Sterling slid 0.5 percent to $1.6296 as of 10:08 a.m. in London. The pound strengthened 0.3 percent to 87.94 pence per euro, after appreciating as much as 0.5 percent. Wage growth excluding bonuses slowed to 2 percent in the three months through April, the weakest since the quarter through August. The pound had been supported by a separate report that showed U.K. consumer confidence jumped the most in 5 1/2 years in May. An index of sentiment compiled by the Nationwide Building Society gained 11 points from April to 55, the highest in five months. An emergency session of European finance ministers in Brussels yesterday failed to reconcile a German-led push for bondholders to shoulder part of the cost of a new Greek aid package, with European Central Bank warnings backed by France that the move might constitute a sovereign default. U.K. government bonds declined before an auction of 2.25 billion pounds ($3.7 billion) of debt maturing in 2027. The yield on the 10-year gilt rose one basis point to 3.31 percent, while the two-year note yielded 0.85 percent. To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net. To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net.

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