BLBG:Pound Heads for Weekly Loss Against the Euro on Bets Europe Crisis Abating
The pound headed for it first weekly loss against the euro since Dec. 2 amid speculation Europe’s debt crisis is easing, damping demand for the perceived haven of British assets.
Sterling was little changed after tumbling yesterday, when European Central Bank President Mario Draghi said there were “tentative signs of stabilization” in the euro-region. The pound touched a three-month low against the dollar yesterday, when the National Institute of Economic and Social Research said the U.K. economy barely expanded in the fourth quarter.
Draghi’s comments “have stimulated some risk appetite,” said Michael Derks, chief strategist at FXPro Financial Services Ltd. in London. “With slightly less focus on the euro, what has started to concern some is the weakness in the U.K. figures. The economy is flirting with recession, and that is not helping the currency.”
Sterling traded at 83.59 pence per euro at 10:04 a.m. London time. It’s dropped 1.4 percent since Jan. 6. The pound strengthened 0.1 percent to $1.5353 after falling to $1.5279 yesterday, the least since Oct. 6.
Gross domestic product probably rose 0.1 percent in the fourth quarter, compared with growth of 0.3 percent in the three months through November, Niesr, whose clients include the Bank of England and the U.K. Treasury, said yesterday. The economy grew 0.6 percent in the third quarter.
Gilt Yields
The yield on 10-year gilts fell one basis point, or 0.01 percentage point, to 2.01 percent after a report showed U.K. factory output prices unexpectedly dropped in December for the first time in 18 months. The cost of goods at factory gates declined 0.2 percent from November, the Office for National Statistics said. Economists had forecast a 0.1 percent gain, according to a Bloomberg News survey.
The data suggests “pipeline pressures are easing,” said Nick Stamenkovic, a fixed-income strategist in Edinburgh at RIA Capital Markets Ltd., a broker for banks and investors. That may be “a supportive factor for gilts,” he said.
Sterling has advanced 1.1 percent in the last six months against nine developed-nation peers tracked by Bloomberg Correlation-Weighted Indexes, the fourth best performer after the dollar, the yen and the Australian dollar.
To contact the reporters on this story: David Goodman in London at dgoodman28@bloomberg.net;
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
