BLBG:Pound Falls Versus Euro After Moody’s Cuts U.K. Growth Forecast
The pound weakened against the euro for the first time in four days after Moody’s Investors Service lowered its forecast for U.K. economic growth.
Sterling declined versus all except two of its 16 major counterparts as an industry report showed U.K. consumer confidence stalled this month as efforts by the government and the Bank of England to pull the economy out of a recession failed to boost sentiment. U.K. government bonds gained.
“The fundamentals are negative for the pound and we see it weakening further,” said Lee Hardman, a foreign-exchange strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “The longer the period of economic stagnation goes on, the greater emphasis there is on the government to change its fiscal program.”
The pound declined 0.2 percent to 78.16 pence per euro at 9:50 a.m. London time after falling to 78.74 pence on July 27, the weakest level since July 17. The U.K. currency dropped 0.2 percent to $1.5686.
Sterling has depreciated 0.5 percent in the past week, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-market currencies. The dollar weakened 1.8 percent and the euro was little changed.
“Moody’s sees rising challenges in achieving debt reduction within the timeframe that has been laid out by the government,” the rating company said in a credit opinion in London. Still, it “believes that the U.K. government’s response to negative developments late last year indicates it commitment to restoring a sustainable debt position.”
Sentiment Index
An index of consumer confidence stayed at minus 29, London- based research group GfK NOP Ltd. said in an e-mailed report. The gauge has been in a range of minus 29 to minus 31 for the past seven months. A measure of Britons’ outlook for the economy over the next 12 months rose 1 point.
The 10-year gilt yield fell three basis points, or 0.03 percentage point, to 1.51 percent after dropping to a record 1.407 percent on July 23. The 4 percent bond due March 2022 rose 0.305, or 3.05 pounds per 1,000-pound face amount, to 122.18.
U.K. government bonds have returned 1.5 percent this month, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bunds gained 1.4 percent and Treasuries rose 1 percent.
To contact the reporter on this story: Neal Armstrong in London at narmstrong8@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
