The pound gained versus 10 of the 16 most-active currencies tracked by Bloomberg today as traders bet the Bank of England will slow the pace of its interest-rate cuts while inflation remains above target. Britain's currency declined 1.1 percent against the euro yesterday as HBOS Plc, the nation's biggest mortgage lender, was forced to deny it has liquidity problems.
The pound rose as much as 1.4 percent to 77.70 pence per euro, and was at 77.81 pence by 2:53 p.m. in London, compared with a record low of 79.12 on March 17. It climbed the most against the Norwegian krone, Swedish krona and Swiss franc. The pound fell for a second week running versus the common European currency, by 1.2 percent.
Britain's currency declined to 196.15 yen, after yesterday dropping 1.9 percent to 196.50 yen. It extended its weekly loss to 4.4 percent, the most since the week ending Jan. 4.
The pound fell to a two-week low of $1.9736, before trading at $1.9830, from $1.9843 yesterday. The dollar strengthened as speculation a global economic slowdown will reduce demand for raw materials pushed gold and oil lower.
U.K. retail sales rose for a second month in February, led by food and clothing, the Office for National Statistics said today in London. Sales climbed 1 percent from January, compared with the 0.2 percent decline forecast by economists surveyed by Bloomberg News. Sales increased 5.5 percent in the year.
Inflation quickened to the fastest pace in nine months in February, and stayed above the central bank's target for a fifth month, a government report showed this week.
The pound fell versus 11 of the 16 major currencies this past week, and gilts climbed, on speculation the credit squeeze that started with the collapse of the U.S. subprime-mortgage market continues to spread across the Atlantic.
The Bank of England renewed an offer of emergency short-term funds to banks today as it hosted a meeting of executives to try and stem a financial crisis. Policy makers have struggled to tame money-market rates as banks, encumbered by losses of at least $195 billion, remain reluctant to lend to each other.
HBOS plummeted as much as 17.1 percent in London trading yesterday on rumors it may become the latest casualty of the liquidity crunch.
This week also saw JPMorgan Chase & Co. purchase Bear Stearns Cos. for a fraction of its share value a month ago, and the Bank of England and Federal Reserve pump billions into the money markets. The Fed cut its so-called discount rate March 16, its first weekend emergency action for a generation.
Stocks fell this week, with the U.K.'s FTSE 100 Index dropping 3.4 percent and the Dow Jones Stoxx 600, a benchmark for Europe, sliding 3.7 percent. In the U.S., the Dow Jones Industrial Average climbed 0.5 percent since March 13.