BLBG:Pound Weakens as Bank of England Starts Two-Day Policy Meeting
The pound fell for the first time in three days against the dollar before Bank of England policy makers start a two-day meeting to decide whether to add more stimulus to the economy to spur growth.
The U.K. currency weakened against all except one of its 16 major counterparts as 11 of the 39 economists surveyed by Bloomberg predict the central bank will increase its asset purchase target to at least 400 billion pounds ($603 billion) from the current 375 billion pounds. Sterling rose yesterday as a report showed U.K. services expanded in February. U.K. government bonds were little changed.
“The risk, if there is a surprise at all, is that there will be more asset purchases and that will weigh on sterling,” said Raghav Subbarao, a foreign-exchange strategist at Barclays Plc in London. “Our base case is that there won’t be any change in policy tomorrow.”
The pound dropped 0.3 percent to $1.5085 at 9:57 a.m. London time after falling to $1.4986 on March 1, the weakest level since July 2010. The U.K. currency declined 0.2 percent to 86.44 pence per euro.
Sterling has depreciated 5.6 percent this year, the worst performer among 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar gained 2.6 percent and the euro rose 1.3 percent.
The benchmark 10-year gilt yielded 1.97 percent. The price of the 1.75 percent bond due in September 2022 was at 98.105
U.K. government bonds have lost 1 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bonds dropped 0.5 percent and Treasuries fell 0.3 percent.
To contact the reporter on this story: Neal Armstrong in London at narmstrong8@bloomberg.net
To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net
