BLBG:Pound Weakens Versus Euro, Yen As Inflation Slows
The pound weakened against the euro as a report showed inflation slowed to the least since November 2009, strengthening the case for the Bank of England to resume asset purchases to revive the economy.
Sterling also fell against the yen before the central bank publishes the minutes of its June meeting tomorrow, in which policy makers may indicate their stance on printing more money to lift the U.K. out of recession. Two-year gilts rose.
“There’s been a fairly consistent tendency for sterling to outperform on positive inflation surprises and underperform on negative surprises, and that’s again what we are seeing today,” said Adam Cole, global head of foreign-exchange at RBC Capital Markets in London. “We may see some softness as the markets builds in more expectation of QE.”
The pound fell 0.4 percent to 80.60 pence per euro at 11:20 a.m. London time. It dropped 0.3 percent to 123.62 yen and was little changed against the dollar at $1.5665.
Consumer prices rose 2.8 percent from a year earlier, compared with a 3 percent increase in April, the Office for National Statistics said today in London. That’s the weakest since November 2009. Economists had forecast a gain of 3 percent, the median of 29 estimates in a Bloomberg News survey showed. From April, prices fell 0.1 percent, the first drop in that period since records began in 1996.
Sterling has appreciated 1.5 percent this year, the second- best performer among 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes, after the New Zealand dollar, as investors sought U.K. assets as a haven from Europe’s debt crisis. The euro dropped 2.2 percent.
G-20 leaders began a two-day meeting in Mexico yesterday as Spain’s borrowing costs surged to a euro-era record and elections in Greece failed to damp the threat of debt-crisis contagion.
Two-year note yields slipped two basis points, or 0.02 percentage point, to 0.22 percent after falling to 0.173 percent yesterday, the lowest on record. Ten-year gilt yields were little changed at 1.66 percent.
To contact the reporter on this story: Anchalee Worrachate at aworrachate@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
