BLBG:Pound Weakens as U.K. House Prices Slide, Trade Group Sees Recession Risk
The pound weakened versus the euro after data showed U.K. house prices dropped last month and the British Chambers of Commerce cut its economic growth forecasts.
The pound also fell against the Australian dollar before Chancellor of the Exchequer George Osborne presents updated economic and fiscal forecasts to Parliament tomorrow amid speculation government growth estimates will be cut and budget shortfalls will be greater than predicted. Gilts declined on concern the government may have to issue more bonds this year than the 167.5 billion pounds envisaged earlier.
“We have a negative view about the pound,” said Geoffrey Yu, a currency strategist at UBS AG in London. “With the pre- budget statement later in the week, there is going to be more focus on U.K. growth. Credit and housing numbers are probably going to soften. People are going to question growth, and rightly so.”
The pound lost 0.3 percent against the euro to 85.95 pence at 8:51 a.m. London time. It underperformed higher-yielding currencies, declining 1.2 percent to 1.5706 Australian dollars.
Gilts fell, pushing 10-year yields up seven basis points to 2.36 percent. The 3.75 percent bond due September 2021 slid 0.605, or 6.05 pounds per 1,000-pound ($1,551) face amount, to 112.115. Two-year yields rose two basis points to 0.48 percent.
Home Costs
The average cost of a home fell 0.2 percent from October and was down 2.3 percent from a year earlier, Hometrack Ltd. said today in an e-mailed report on its monthly survey of real- estate agents. Prices based on the property researcher’s gauge have fallen every month but one since July 2010.
The BCC said today gross domestic product will increase 0.9 this year, 0.8 percent in 2012 and 1.8 percent in 2013, compared with previous forecasts of 1.1 percent, 2.1 percent and 2.5 percent respectively. It added that the risk of another recession “cannot be shrugged off,” and predicted the Bank of England will add to its bond-purchase plan early next year.
Gilts have returned 15 percent this year, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German debt gained 6.6 percent and U.S. Treasuries rose 9.4 percent, the indexes show.
To contact the reporters on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
