Bloomberg News

Pound Falls Before Report Predicted to Show Construction Slowed

October 04, 2011

Oct. 4 (Bloomberg) -- The pound declined against higher- yielding currencies before a report that is predicted to show construction growth slowed in September, strengthening the case for more stimulus from the Bank of England.

Sterling weakened against 11 of its 16 major counterparts, falling most versus the New Zealand dollar. A gauge of building activity from Markit Economics Ltd. and the Chartered Institute of Purchasing and Supply, probably slipped to 51.6 from 52.6 in August, according to the median estimate in a Bloomberg survey. A reading above 50 indicates expansion.

The pound fell 0.1 percent to 85.48 pence per euro at 7:09 a.m. in London. Sterling was 0.2 percent stronger at $1.5461 and 118.46 yen. It fell 0.6 percent to 2.0384 New Zealand dollars.

It is becoming “increasingly probable” that another round of government-bond purchases may be needed to boost the economy, Bank of England policy makers said in the minutes of its Sept. 8 policy meeting. The central bank has the tools available to provide additional “monetary loosening” should the economy continue to deteriorate, Chief Economist Spencer Dale said in an interview with the Daily Mail published on Sept. 29.

At the same time, accelerating inflation means a resumption is not a “no brainer,” he said. The central bank announces its next interest-rate and bond buying decisions on Oct. 6.

A report yesterday showed a surprise expansion of U.K. manufacturing in September. The gauge of U.K. factory output rose to 51.1 from 49.4 in August, a survey by Markit Economics and the Chartered Institute of Purchasing and Supply showed.

That was higher than the 48.5 median forecast in a Bloomberg survey.

--Editors: Matthew Brown, Tim Farrand

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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