BLBG:Pound Weakens Fourth Day Versus Euro as German Confidence Rises
The pound dropped for a fourth day against the euro as an improvement in German business confidence and speculation the Bank of England will boost stimulus sapped demand for the U.K. currency.
Sterling headed for its biggest weekly decline against the 17-nation currency in more than three months as data this week showed British retail sales unexpectedly fell in April and inflation slowed more than economists forecast. Bank of England Markets Director Paul Fisher said policy makers must continue to provide support to the economy. Central bank Governor Mervyn King will speak in Helsinki today. U.K. government bonds headed for a weekly loss.
“We’ve had better data on the euro side with the German Ifo and euro-sterling is firmer,” said Steve Barrow, head of Group-of-10 research at Standard Bank Plc in London. “The U.K. data flow has really damaged sterling this week, maybe a little more than expected.”
The pound fell 0.2 percent to 85.80 pence per euro at 11:35 a.m. London time after depreciating to 85.97 pence, the weakest since April 17. The U.K. currency has declined 1.4 percent this week, the most since the period ended Feb. 15. Sterling was little changed at $1.5132 after dropping to $1.5014 yesterday, the lowest since March 14.
Fisher repeated his proposal for a potential prolonged period of “slow” bond purchases tied to the economic outlook, speaking to reporters after an event hosted by the Cardiff Breakfast Club.
The pound has weakened 3.1 percent this year, the second-worst performer after the yen among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar gained 5 percent and the euro rose 3.1 percent.
The Ifo institute’s German business climate index, based on a survey of 7,000 executives, climbed to 105.7 from 104.4 in April. Economists predicted it would remain unchanged, according to a Bloomberg News survey.
‘Inflation Expectations’
“My policy vote has been driven by the need to continue supporting the required real adjustments, which still have much to work through, but cautiously, so as not to risk inflation expectations becoming deanchored,” Fisher said in a speech in Cardiff, Wales. “Faster growth in the near-term might actually help keep inflation down for a while as productivity growth picks up.”
Fisher, along with Governor King and David Miles, was defeated in a push for increasing stimulus at the May 8-9 meeting of the nine-member Monetary Policy Committee.
The benchmark 10-year gilt yield was little changed at 1.92 percent. The rate has increased four basis points, or 0.04 percentage point, this week. The price of the 1.75 percent bond due in September 2022 was 98.53.
U.K. gilts handed investors a loss of 1.8 percent this month through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bunds dropped 1.1 percent and Treasuries fell 1.4 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
