BLBG:Pound Drops for Sixth Day Against Dollar as Retail Sales Decline
The pound weakened for a sixth day against the dollar after a government report showed U.K. retail sales unexpectedly declined in December, adding to signs the economy is struggling to recover.
Sterling dropped to a nine-month low versus the euro after excerpts from a proposed speech by Prime Minister David Cameron raised the specter of Britain exiting the 27-nation European Union. U.K. government bonds erased an earlier decline. Bank of England policy maker Ian McCafferty said officials must have an open mind about ways to help the recovery, signaling he may support new stimulus measures.
“We obviously had very weak retail sales numbers there,” said Christian Lawrence, a currency strategist at Rabobank International in London. “It’s only if we get some headlines coming out of the mouths of politicians that we’re likely to see much of a sea change in sentiment” toward sterling, he said.
The pound fell 0.4 percent to $1.5935 at 11:41 a.m. London time after sliding to $1.5924, the lowest level since Nov. 22. The U.K. currency depreciated 0.2 percent to 83.77 pence per euro after falling to 83.88 pence, the weakest since March 28.
While Cameron postponed the speech in Amsterdam due to the hostage crisis in Algeria, his office released excerpts for publication before the scheduled address today.
“More of the same” won’t be enough to guarantee the EU’s future due to Britons’ dismay at a lack of consent in their relationship with the bloc, the Prime Minister planned to say, according to the text.
Retail Sales
Retail sales including fuel slipped 0.1 percent from November, when they stagnated, the Office for National Statistics said in London. The median forecast of economists in a Bloomberg survey was for an increase of 0.2 percent. Purchases of household goods fell the most in almost three years.
The pound has declined against all except two of its 16 major counterparts this week amid concern a loosening of the U.K.’s relationship with the EU will sap investor confidence and threaten London’s role as a financial center.
The pound has weakened 1.9 percent this year, the third- worst performance after the Japanese yen and Swiss franc, according to Bloomberg Correlation-Weighted Indexes, which track 10 developed-market currencies. The euro advanced 1.6 percent and the dollar gained 0.3 percent.
‘Unorthodox Means’
“We need to be open to considering other unorthodox means to conduct monetary policy if they become necessary,” McCafferty said today in an interview with Guy Johnson on Bloomberg Television in London.
Asked about the pound and whether he would favor a weaker level to help exports, McCafferty said there “are questions on whether sterling is now at a competitive level in terms of allowing that fundamental rebalancing.”
The 10-year gilt yield dropped one basis point, or 0.01 percentage point, to 2.03 percent after climbing as much as three basis points. The 1.75 percent bond due September 2022 rose 0.045, or 45 pence per 1,000-pound face amount, to 97.515.
U.K. government bonds handed investors a loss of 1.6 percent this month through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bonds dropped 1.5 percent and Treasuries fell 0.5 percent.
To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
