BLBG:U.K. Pound Extends Fourth Weekly Decline Against Dollar on QE Speculation
The pound weakened against the dollar, extending a fourth weekly decline, on speculation a worsening economic growth outlook will spur the Bank of England to introduce additional monetary stimulus.
Sterling approached an eight-month low versus the greenback after reports this week showed U.K. retail sales fell and jobless claims rose even as inflation quickened. Business Secretary Vince Cable called for further monetary stimulus, or quantitative easing, and called for the use of “creative mechanisms” that go beyond the purchase of government bonds.
“This week’s data has not been supportive of sterling,” said Audrey Childe-Freeman, global head of currency strategy in London at the private-banking unit of JPMorgan Chase & Co. “‘The U.K. is facing continual inflationary pressure in a stagnant economic environment and that’s never great for the currency. There is growing sentiment in the market that there will be further QE.”
The pound weakened 0.2 percent to $1.5767 at 9:48 a.m. in London, extending its decline this week to 0.7 percent. Sterling climbed 0.4 percent versus the euro to 87.49 pence, snapping a four-day decline.
Politicians including Chancellor of the Exchequer George Osborne and Deputy Prime Minister Nick Clegg have emphasized the possibility of further monetary easing to help revive Britain’s economy. Bank of England policy maker Adam Posen this week called for the central bank to buy as much as 100 billion pounds in securities within three months and warned that officials’ delay in acting has made economic prospects “worse.”
The central bank’s quantitative-easing program, currently worth 200 billion pounds, remains the preferred tool to stimulate demand, Cable wrote in a pamphlet published before the Liberal Democrats’ annual party conference starting Sept. 17.
Gilts rose for the first time in four days, with 10-year yields falling three basis points to 2.50 percent. Benchmark yields have still risen four basis points this week.
To contact the reporter on this story: Garth Theunissen in London gtheunissen@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
