BLBG:Pound Falls for Second Day Versus Euro as U.K. Retail Sales Drop
The pound weakened for a second day against the euro after an industry report showed a gauge of U.K. retail sales unexpectedly declined last month, signaling the economic recovery is uneven.
Sterling dropped against most of its major counterparts even as a separate report from Lloyds Banking Group Plc’s Halifax unit showed house prices rose in April more than economists predicted. The Bank of England’s Monetary Policy Committee starts a two-day meeting today to review interest rates and whether to resume its program of bond purchases known as quantitative easing. Government bonds gained.
“We’ve got the Bank of England tomorrow and we could see a pullback on the pound,” said Michael Hewson, a market analyst at CMC Markets Plc in London. “I don’t see too much downside in it. It’s very unlikely the Bank of England will do any further quantitative easing between now and the third quarter.”
The pound weakened 0.2 percent to 84.63 pence per euro at 9:39 a.m. London time after sliding 0.4 percent yesterday. The U.K. currency was little changed at $1.5485 after climbing to $1.5606 on May 1, the strongest since Feb. 13.
Retail sales at stores open at least 12 months, measured by value, dropped 2.2 percent in April from a year earlier, the British Retail Consortium said. The median forecast of economists surveyed by Bloomberg was for a gain of 1.9 percent. Home values rose 1.1 percent from March, when they increased by a revised 0.4 percent, Halifax, said.
Best Performer
The U.K. currency has strengthened 1.9 percent in the past month, the best performer of 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar rose 0.3 percent, while the euro gained 1.1 percent.
The 10-year gilt yield dropped two basis points, or 0.02 percentage point, to 1.77 percent after rising to 1.81 percent yesterday, the highest since March 26. The 1.75 percent securities due in September 2022 gained 0.15, or 1.50 pounds per 1,000-pound face amount, to 99.82.
The Debt Management Office is scheduled to sell 1.1 billion pounds of inflation-linked bonds maturing in 2044 today. The U.K. last sold the securities on March 21 at a so-called real yield of minus 0.033 percent, the lowest on record, according to data compiled by Bloomberg.
Gilts returned 1 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bonds gained 0.5 percent and Treasuries rose 0.4 percent.
To contact the reporter on this story: Lukanyo Mnyanda in Edinburgh at lmnyanda@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
