BLBG:Pound Falls to 2 1/2-Year Low Versus Dollar Before BOE Decision
The pound dropped to its weakest level in more than 2 1/2 years versus the dollar before Bank of England policy makers announce their decision on whether they will add more stimulus to boost the U.K. economy.
Sterling weakened for a third day against the euro after the Financial Times said Chancellor of the Exchequer George Osborne is considering giving the central bank more time to bring inflation back to its 2 percent target. The Monetary Policy Committee will hold its asset-purchase target at 375 billion pounds ($562 billion), according to the median estimate of 39 economists in a Bloomberg News survey. The remainder predict an expansion. Gilts were little changed.
“The only thing we’ve really got left is easing monetary policy,” said Simon Derrick, chief currency strategist at Bank of New York Mellon Corp. (BK) in London. “Whether that is today or in April, I think we’ve got a pretty good idea of the way that this going to work. I don’t find it surprising that sterling is under pressure.”
The pound fell 0.2 percent to $1.4990 at 9:11 a.m. London time, after sliding to $1.4967, the lowest since July 13, 2010. Sterling declined 0.6 percent to 86.88 pence per euro.
The U.K. currency will weaken toward $1.40 by the end of the year, Derrick said.
A Treasury spokesman played down the FT report, declaring it no more than a reflection of the public debate on the subject and adding that that Osborne will consider the Bank of England’s inflation target.
The pound has depreciated 6 percent this year, the worst performer among 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar gained 2.8 percent and the euro rose 1.3 percent.
U.K. government bonds have lost 0.9 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bunds and Treasuries both fell 0.5 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
