The pound approached an 11-week low against the euro amid speculation the Bank of England will maintain stimulus measures that typically debase the currency. Sterling was within one U.S. cent of the weakest in almost four months after U.K. policy makers led by Governor Mark Carney signaled last week they will keep interest rates at a record low for longer than investors anticipated. Britain’s currency slumped below $1.49 to the lowest in more than three months last week. U.K. government bonds were little changed. Economists predict a report tomorrow will will show industrial production expanded in May. “The Bank of England want to keep a cautious outlook and that should keep the pound on the back foot,� said John Hardy, head of foreign-exchange strategy at Saxo Bank A/S in London. “If the data begins to turn the wrong way again you have a compelling case for more pound weakness.� The U.K. currency fell less than 0.1 percent to 86.21 pence per euro at 12:01 p.m. London time after depreciating to 86.33 on July 4, the weakest level since April 17. Sterling traded at $1.4907 after dropping to $1.4858 on July 5, the lowest since March 12. The U.K. recovery “remains weak� by historical standards and rising market borrowing costs pose a threat to the expansion, the central bank said in a statement after its July 3-4 meeting. The nine-member Monetary Policy Committee kept its benchmark interest rate at a record-low 0.5 percent and its asset-purchase target at 375 billion pounds. Pound’s Decline The pound has weakened 2 percent this year, according to Bloomberg Correlation-Weighted Indexes that track 10 developed-nation currencies. The dollar strengthened 7.9 percent and the euro gained 4.9 percent. Industrial output rose 0.2 percent in May after gaining 0.1 percent the previous month, according to the median estimate of analysts in a Bloomberg News survey before tomorrow’s report from the Office for National Statistics. Britain’s economy could be in line for a period of “strong catch-up growth� once it gets through the current weakness, according to Capital Economics Ltd. The company also cited the potential impact of Carney, whose started in his role on July 1 “could trigger more support from monetary policy.� Carney’s first policy meeting followed a slump in global bond markets sparked by Federal Reserve Chairman Ben S. Bernanke’s comments that the U.S. central bank is considering reducing asset purchases. The benchmark 10-year gilt yield was at 2.49 percent after climbing to 2.59 percent on June 24, the highest since October 2011. The price of the 1.75 percent security due in September 2022 was 94. Confidence Improves U.K. business confidence and output both rose to 13-month highs in June, BDO LLP said today. The sentiment gauge climbed for a fifth month to 94.3 from 93.6 in May, while a measure of output advanced to 94.9 from 94.4. Still, both remain below the 95 threshold that indicates growth, BDO said. “While it’s encouraging to see confidence continuing to improve, we should be mindful of the zig-zag trend that has characterized U.K. business confidence since 2008,� BDO partner Peter Hemington said. Gilts handed investors a loss of 3.8 percent this year through July 4, according to Bloomberg World Bond Indexes. German bonds dropped 1.6 percent and Treasuries declined 3.9 percent, the indexes show. To contact the reporter on this story: Emma Charlton in London at echarlton1@bloomberg.net To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net

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