BLBG:Pound Falls Versus Euro On Bets Central Bank To Resume Stimulus
The pound fell for the first time in four days against the euro amid speculation the Bank of England will restart its program of asset purchases to spur growth.
Gilts advanced, with two- and five-year yields dropping to records, after a government report yesterday showed U.K. gross domestic product shrank more than initially estimated in the first quarter. The government will auction 3.5 billion pounds ($5.48 billion) of bills today.
“Negativity toward the U.K. is increasing after the GDP figures yesterday and rising prospects of quantitative easing,” said Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce in London. “The 80 pence per euro area is proving pretty tough to get through.”
The pound declined 0.4 percent to 80.29 pence per euro at 10:30 a.m. London time after strengthening 1.2 percent over the previous three days. The currency was little changed at $1.5675. It fell to $1.5639 yesterday, the weakest since March 15.
The Monetary Policy Committee voted 8-1 at its May meeting to keep its target for bond purchases at 325 billion pounds, minutes released on May 23 showed. The International Monetary Fund said May 22 the U.K. central bank needs to inject more stimulus into the economy.
Gross domestic product fell 0.3 percent, compared with a 0.2 percent decline estimated last month, the Office for National Statistics said yesterday. Construction output declined 4.8 percent, the most in three years.
Weekly Loss
Sterling has fallen 0.2 percent this week, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-nation currencies. The dollar gained 0.8 percent, and the euro weakened 0.9 percent.
The two-year gilt yield dropped three basis points, or 0.03 percentage point, to 0.22 percent after declining to 0.216 percent, the lowest since Bloomberg began collecting the data in 1992. The 2.25 percent note due in March 2014 gained 0.03, or 30 pence per 1,000-pound face amount, to 103.6.
U.K. debt has returned 3 percent this month, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bunds gained 2 percent, and U.S. Treasuries rose 0.9 percent.
To contact the reporters on this story: David Goodman in London at dgoodman28@bloomberg.net
To contact the editors responsible for this story: Daniel Tilles at dtilles@bloomberg.net
