BLBG:Pound Heads for Weekly Loss Versus Euro as House Prices Fall; Gilts Gain
The pound headed for a weekly loss against the euro after an industry report showed U.K. house prices fell to a six-month low, fuelling speculation the Bank of England will increase bond buying to keep borrowing costs low.
Gilts rose after the central bank said yesterday it will pump another 50 billion pounds ($79.1 billion) into the economy as the growth outlook remains “weak.” Britain’s economy shrank 0.2 percent in the fourth quarter as rising unemployment and the government’s austerity measures damped consumer spending.
“We are far from out of the woods when it comes to the economic data,” said Lee McDarby, head of dealing on the corporate and institutional treasury desk at Investec Bank Plc in London. “There is still scope for some more BOE stimulus and that pushes the chance of U.K. interest rate increases far into the distance. The pound is on the back foot.”
The pound was little changed at 83.92 pence per euro at 9:24 a.m. London time after falling to 84.07 pence, the weakest since Jan. 30. Sterling has declined 0.9 percent versus the euro this week. The U.K. currency was also little changed at $1.5826.
The average price of a home in England and Wales fell 0.2 percent from December to 218,992 pounds, Acadametrics Ltd. and LSL Property Services Plc said in an e-mailed report. From a year earlier values fell 1.4 percent, the biggest drop since September, they said.
U.K. government bonds rose, with the 10-year yield falling three basis points to 2.2 percent. Two-year yields declined two basis points to 0.4 percent.
To contact the reporter on this story: Emma Charlton in London at echarlton1@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
