Bloomberg News

Pound Approaches Lowest Since January Before Retail Sales Report

September 15, 2011

Sept. 15 (Bloomberg) -- The pound approached its weakest level since January against the dollar before a report that economists said will show U.K. retail sales dropped last month, adding to the case for more central bank asset-purchases.

Sterling slid earlier to the least since January 2009 against the yen. Retail sales, including fuel, fell 0.3 percent, after increasing 0.2 percent in July, the Office for National Statistics will say today in London, according to the median forecast of 24 economists in a Bloomberg News survey.

“Sterling is clearly on the back foot because of its weak fundamentals,” Jane Foley, a senior foreign-exchange strategist at Rabobank International in London, said in an interview yesterday. “It’s clear that the Bank of England is more concerned about the weakness of domestic demand and are maintaining the view that inflation will drop back significantly.”

The pound fell 0.1 percent to $1.5755 at 8:25 a.m. in London, after sliding to $1.5707 yesterday, the lowest since Jan. 12. The currency was little changed at 120.80 yen, after reaching 120.682, the weakest level since Jan. 26, 2009. It was also little changed, at 87.27 pence per euro.

Britain’s currency has depreciated 6 percent in the past 12 months against a basket of nine major peers, the second-worst performer after the dollar, which fell 6.8 percent, according to Bloomberg Correlation-Weighted Currency Indexes.

U.K. government bonds rose, with the 10-year gilt yield dropping two basis points to 2.43 percent, and the two-year yield also falling two basis points, to 0.55 percent.

Gilts have returned 2.9 percent this month, compared with 2.1 percent for German government bonds and 1.1 percent for U.S. Treasuries, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies.

--Editors: Matthew Brown, Mark McCord

To contact the reporters on this story: Lukanyo Mnyanda in Edinburgh at lmnyanda@bloomberg.net

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net


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