BLBG:Pound Falls From Five-Week High Versus Euro After Output Slumps
The pound fell from a five-week high versus the euro after a report showed U.K. manufacturing rose less than economists forecast in September and overall industrial output plunged.
Sterling declined versus most of its 16 major peers tracked by Bloomberg before Bank of England policy makers start a two- day meeting tomorrow where they will decide whether to increase monetary stimulus through so-called quantitative easing. Gilts were little changed after the Debt Management Office sold 3.25 billion pounds ($5.2 billion) of 10-year bonds.
“The pickup in momentum in the economy during the third quarter appears to have stalled into the fourth and that makes it a closer call for the Bank of England this week,” said Lee Hardman, a foreign-exchange strategist at Bank of Tokyo- Mitsubishi UFJ Ltd. in London. “BOE policy has not been the main driver of pound direction, which is being influenced more by developments in the euro area.”
The pound was little changed at 80.05 pence per euro at 11:17 a.m. London time, after appreciating to 79.84 pence, the strongest level since Oct. 2. Britain’s currency was also little changed at $1.5971. It fell 0.9 percent in the past two sessions.
The pound will rise to 76.50 per euro within the next 12 months, Hardman forecast.
Factory Output
Factory output increased 0.1 percent from August, the Office for National Statistics said today in London. The median forecast of 30 economists in a Bloomberg News survey was for a gain of 0.4 percent. Overall industrial production plunged 1.7 percent as oil and gas output dropped by a record.
Separate reports today showed U.K. retail sales fell and house prices slid in October.
The nine-member Monetary Policy Committee will leave the target for asset purchases at 375 billion pounds on Nov. 8, according to 35 of 45 economists in a Bloomberg News survey. Six forecast a 50 billion-pound increase, and four predict a 25 billion-pound expansion.
The pound has gained 1.3 percent this year according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-market currencies. The euro fell 3.2 percent, while the dollar dropped 1.7 percent.
The 10-year gilt yield was at 1.82 percent. The 1.75 percent bond due September 2022 traded at 99.41.
The Debt Management Office sold gilts maturing in September 2022 at an average yield of 1.82 percent, with investors bidding for 1.9 times the amount of securities on offer. The U.K. last sold 10-year securities on Oct. 2, at an average yield of 1.764 percent.
Gilts have returned 2.8 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bonds gained 3.6 percent and U.S. Treasuries earned 2.1 percent.
To contact the reporter on this story: Neal Armstrong in London at narmstrong8@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
