The pound snapped a three-day rally against the dollar before a report that may show U.K. inflation accelerated in July as energy costs rose, squeezing Britons facing slowing economic growth and government spending cuts. Sterling declined against half of its 16 major peers tracked by Bloomberg, sliding most versus the Swiss franc. Consumer price inflation probably quickened an annual 4.3 percent last month, compared with 4.2 percent in June, according to the median estimate of 28 economists surveyed by Bloomberg. The Office for National Statistics publishes the data at 9:30 a.m. local time. Gilts were little changed. “With the economy in weak shape, there’s still a much greater chance that the next monetary move from the Bank is an easing, not a tightening,” Steve Barrow, the London-based head of Group-of-10 currency research at Standard Bank Plc, wrote in a client note today. “Today’s data could give gilts and short- sterling futures some support but weigh on the pound.” The pound fell 0.3 percent to $1.6342 as of 8:44 a.m. in London. Sterling was little changed against the euro at 88.10 pence and lost 0.3 percent to 125.59 yen. Investors are betting the Bank of England won’t raise borrowing costs until after July next year, data from Tullett Prebon Plc on forward contracts for the sterling overnight interbank average, or Sonia, show. As recently as February, the data indicated traders were betting on a rate increase this May. The central bank will tomorrow publish minutes of its Aug. 3-4 policy meeting, when it left its benchmark interest rate on hold at 0.5 percent. The 10-year gilt yield was little changed at 2.53 percent. Two-year yields were also little changed at 0.67 percent. Chancellor of the Exchequer George Osborne said on Aug. 11 that the U.K.’s recovery will “take longer and be harder,” while Bank of England Governor Mervyn King signaled a day earlier that he may resume pumping cash into the economy to boost growth. Britain’s economy will grow 1.2 percent this year, slower than a projected 3.4 percent expansion in Germany and a 1.8 percent increase in the U.S., Bloomberg surveys show. To contact the reporter on this story: Garth Theunissen in London gtheunissen@bloomberg.net To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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