The pound fell against the euro as a report showed U.K. house prices fell more than economists predicted last month, bolstering the case for more economic stimulus from the Bank of England. Sterling retreated from its strongest level since June 16 against the Swiss franc. Home prices fell 1.2 percent in August, after increasing 0.2 percent in July, Halifax, the mortgage unit of Lloyds Banking Group Plc (LLOY), said today. The median estimate of five economists in a Bloomberg survey was for a decline of 0.3 percent. Manufacturing output was unchanged in July, after falling 0.4 percent in June, a government report will show today, according to a separate Bloomberg survey. Sterling depreciated 0.3 percent to 88.04 pence per euro as of 9:07 a.m. in London, adding to yesterday’s 0.4 percent loss. The pound gained 0.5 percent to $1.6017, after slipping yesterday below $1.60 for the first time since July 13. Britain’s currency weakened 0.3 percent to 1.3705 Swiss francs. Sterling jumped 8.3 percent to 1.3745 against the franc yesterday. The pound has weakened 7 percent in the past 12 months against a basket of nine major peers, according to Bloomberg Correlation-Weighted Currency Indexes. Only the dollar has declined more, depreciating 11 percent. U.K. gilts fell, with the 10-year yield increasing seven basis points to 2.36 percent. The two-year yield rose three basis points to 0.61 percent. Gilts have handed investors a 10 percent return this year, compared with 7.4 percent from German debt and 8.4 percent from U.S. Treasuries, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. To contact the reporters 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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