BLBG:Pound Drops Versus Euro as Data Shows House Prices Stagnated
The pound declined for a second day against the euro after Nationwide Building Society said house prices stagnated this month adding to evidence the U.K. economy is stalling.
Sterling was set for a second monthly decline against the dollar. The average cost of a home was 163,853 pounds ($262,300) in November, Swindon, England-based Nationwide said today. House values may drop “modestly” over the next year because of subdued wage growth, it added. U.K. gilts were little changed, with yields within three basis points of the lowest in more than a week. Spanish and Italian bonds advanced, fueling optimism the euro region’s debt crisis is easing.
“Overall the picture for sterling is going to turn more negative,” said Ian Stannard, head of European currency strategy at Morgan Stanley in London. “Sterling has been relatively well supported by safe-haven flows from Europe but as volatility and risk premium in European asset markets reduces, these flows are slowing down. That is going to expose sterling to its underlying fundamentals, which I don’t think are positive.”
Sterling fell 0.2 percent to 81.04 pence per euro at 9:46 a.m. London time after depreciating to 81.14 pence on Nov. 27, the weakest level since Oct. 24. The pound was little changed at $1.6027.
Mortgage approvals increased for a fourth month in October, with lenders in Britain granting 52,982 home loans compared with 50,415 in September, the Bank of England said late yesterday in London. Economists forecast 51,500 approvals, based on the median of 20 estimates in a Bloomberg News survey.
Gilts
Sterling has dropped 0.7 percent in the past month, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-market currencies. The euro was little changed and the dollar fell 0.6 percent.
The 10-year gilt yield was little changed at 1.78 percent. It fell to 1.75 percent yesterday, the least since Nov. 19. The 1.75 percent bond maturing in September 2022 traded at 99.74.
Gilts returned 3.3 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bunds gained 3.8 percent and U.S. Treasuries earned 2.6 percent.
To contact the reporter on this story: David Goodman in London at dgoodman28@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
