BLBG:Pound Falls to Two-Week Low Versus Dollar Before BOE Decision
The pound fell to a two-week low against the dollar amid the possibility the Bank of England will increase monetary stimulus at a policy meeting today.
The central bank will maintain its asset-purchase target at 375 billion pounds ($564 billion), according to 34 of 37 economists surveyed by Bloomberg News, while three predict an increase to 400 billion pounds. The U.K. currency erased a decline against the euro after a industry report showed Britain’s services output unexpectedly accelerated in March. U.K. government bonds rose.
“The risk from the Bank of England is for a surprise that would weaken sterling,” said Kasper Kirkegaard, a currency strategist at Danske Bank A/S in Copenhagen. “The consensus is for no change but the market is pricing in some probability it could happen. It makes sense the pound is dropping a bit going into the meeting.”
The pound declined 0.3 percent to $1.5078 at 9:36 a.m. London time after falling to $1.5034, the lowest level since March 20. Sterling was little changed at 84.84 pence per euro after weakening as much as 0.3 percent.
Bank of England Governor Mervyn King and two colleagues were outvoted by the other six members of the Monetary Policy Committee in February and March in a push for a 25 billion-pound increase in so-called quantitative easing. Policy makers will keep the main interest rate at a record-low 0.5 percent today, a separate Bloomberg survey showed.
Services Slow
A gauge of U.K. services output based on a survey of purchasing managers rose to 52.4 last month from 51.8 in February, Markit Economics and the Chartered Institute of Purchasing and Supply said in London. Economists surveyed by Bloomberg News forecast a reading of 51.5. A level above 50 indicates expansion.
The pound has declined 5 percent this year, according to Bloomberg Correlation-Weighted Indexes that track 10 developed- nation currencies. The dollar gained 3.4 percent and the euro weakened 0.1 percent.
The benchmark 10-year gilt yield dropped one basis point, or 0.01 percentage point, to 1.74 percent. The 1.75 percent bond due in September 2022 rose 0.095, or 95 pence per 1,000-pound face amount, to 100.05.
Gilts returned 0.9 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bunds gained 0.4 percent and Treasuries rose 0.1 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
