BLBG:Pound Falls Versus Euro as Data Supports Keeping Rates at Record Lows
The pound approached the weakest level in two weeks against the euro as data showed U.K. economic growth slowed and manufacturing shrank, strengthening the case for interest rates to stay at a record low.
Sterling declined to its weakest level since Aug. 17 against the yen. Gross domestic product rose 0.2 percent in the second quarter, the same as estimated a month ago, the Office for National Statistics said today in London. Manufacturing fell 0.5 percent. Total industrial product, which includes mining and utilities’ output, dropped 1.6 percent, the biggest contraction since the first quarter of 2009.
“The development of the economy was not very good in the last month,” said You-Na Park, a currency strategist at Commerzbank AG in Frankfurt. “It’s quite clear that the Bank of England will not hike rates anytime soon, and there’s rather more discussion about quantitative easing. This will normally weigh on the pound.”
Britain’s currency depreciated 0.2 percent to 88.46 pence per euro as of 10:06 a.m. in London, after trading at 88.58 pence, the weakest level since Aug. 10. It declined 0.4 percent to 125.67 yen, after being as low as 125.45, the least since Aug. 17. The pound strengthened 0.3 percent to $1.6301, after declining for two days.
U.K. bonds were little changed, with the yield on 10-year gilt at 2.47 percent and that on the two-year note at 0.58 percent.
The pound weakened against nine major developed-market peers in each of the past six days, the longest run of losses since the period though June 6, according to Bloomberg Correlation-Weighted Currency Indexes.
Consumer confidence dropped in July, Nationwide Building Society said yesterday, fueling concern the economic recovery is faltering. Bank of England policy maker Martin Weale said yesterday he abandoned his call for an interest-rate increase this month due to the risk of contagion from events in the U.S. and Europe.
To contact the reporter on this story: Ed Ballard in London at eballard2@bloomberg.net; Lukanyo Mnyanda in Edinburgh at lmnyanda@bloomberg.net
To contact the editor responsible for this story: Keith Campbell at k.campbell@bloomberg.net
