The pound fell against the euro as a report showed the number of Britons filing jobless-benefit claims increased at the fastest pace in more than two years, fueling concern that the economic recovery is stalling. Sterling snapped three days of gains versus the 17-nation currency and pared its gains against the dollar. Jobless claims rose by 24,500 last month, the biggest increase since May 2009, the Office for National Statistics said today in London. The median forecast of 21 economists in a Bloomberg News Survey was for a gain of 15,000. “The overall theme is that we are going through a lean period where unemployment is going to stay relatively high,” said Shant Movsesian, a strategist in London at 4Cast Ltd., a research company that counts central banks among its subscribers. “Sterling will take a hit on broader risk aversion and its own local problems.” The pound weakened by 0.5 percent to 88.25 pence against the euro as of 10:16 a.m. in London, halting gains that pushed it yesterday to the strongest level since June 16. It was 0.3 percent stronger at $1.5952. It weakened yesterday to $1.5781 yesterday, the lowest level since Jan. 26. Sterling was 0.2 percent weaker against nine developed- market peers tracked by Bloomberg Correlation-Weighted Currency Indexes. It has dropped 6.6 percent in the past year. U.K. government bonds fell, with the 10-year yield rising four basis points to 3.13 percent. The yield fell to 2.93 percent yesterday, the least since October 26. The two-year gilt yield advanced two basis points to 0.72 percent. The pound declined and gilts rose this year amid speculation that slowing economic growth will limit the Bank of England’s ability to raise rates, while the Federal Reserve ends its bond-purchase stimulus program and the European Central Bank tightens monetary policy. Gilts have returned investors 1.9 percent since the end of June, compared with a 3.8 percent decline by Italian bonds, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Spanish bonds have handed investors a 2 percent loss, the indexes show. 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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