The pound weakened against the dollar for a fourth day as stocks declined, damping demand for assets tied to economic growth. U.K. bonds were little changed before the Debt Management Office auctions 4 billion pounds ($6.45 billion) of 28-, 91- and 182-day bills later today. Gilts rose yesterday, when data showed retail sales slid more than forecast in May while jobless-benefit claims surged. The FTSE 100 Index of stocks declined 0.6 percent after former Federal Reserve Chairman Alan Greenspan said a Greek default is “almost certain” and could help drive the U.S. economy into recession. “It’s very much a risk-aversion theme,” said Elizabeth Gregory, a Geneva-based market strategist at Swissquote Bank SA. “We had the retail sales yesterday and there isn’t much good news going around in Europe at the moment, and I think that isn’t weighing just on the euro but also the pound.” The pound fell 0.3 percent to $1.6108 as of 9:19 a.m. in London, extending its third straight weekly decline to 0.7 percent. Sterling traded at 87.85 pence per euro, little changed from 87.91 yesterday. It slipped 0.5 percent to 129.68 yen. Investors yesterday pushed back bets on the month that the Bank of England will next increase rates beyond May of next year, according to forward contracts on the sterling overnight interbank average. As recently as February, traders were betting on an increase as soon as May of this year, data from Tullett Prebon Plc showed. European Debt Impasse Bank of England Governor Mervyn King said officials should continue to hold rates at a record low because weak growth in wages and money signal the current bout of above-target inflation will prove temporary. A rate increase “would have meant a weaker recovery, or even further falls in output” and “a risk of inflation falling well below the target in the medium term,” he said in a speech in London on June 15. German Chancellor Angela Merkel and French President Nicolas Sarkozy meet today in an attempt to resolve an impasse over rescue measures that has seen Greek, Portuguese and Irish bond yields all climb to new records this week. The euro has slid 1.4 percent against the dollar this week as German calls that investors help bail out Greece clashed with European Central Bank warnings backed by France against any compulsory move that might trigger a default. The yield on the 10-year gilt was at 3.18 percent and two- year notes yielded 0.75 percent. Gilts have returned 3.1 percent this year, compared with a 3.4 percent gain on Treasuries, according to European Federation of Financial Analysts Societies and Bloomberg indexes. 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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