The pound has shed 4 percent versus the U.S. currency in the past six months on speculation the Bank of England is trailing the Fed in terms of borrowing-cost reductions. A U.K. government report today will show growth in Europe's second-biggest economy slowed in the first three months of this year, according to economists in a Bloomberg News survey.
The pound fell to $1.9707 by 8:28 a.m. in London, from $1.9740 yesterday and $1.9979 last week. The currency rose to 79.27 pence per euro, from 79.45 pence, paring a weekly drop to 0.1 percent.
U.K. government bonds fell, pushing the yield on the two- year note to the highest level in four months.
The yield on the two-year gilt rose 5 basis points to 4.58 percent. The price of the 4.75 percent security due June 2010 fell 0.11, or 1.1 pounds per 1,000-pound ($1,971) face amount, to 100.34. The 10-year bond yield climbed 4 basis points to 4.81 percent. Yields move inversely to bond prices.
The International Monetary Fund earlier this month forecast that the U.K. economy will expand 1.6 percent this year, the least since 1992, the year after Britain had its last recession.
U.K. gross-domestic product grew 2.6 percent in the first quarter, down from 2.8 percent in the first three months of 2007, economists said before an Office for National Statistics report at 9:30 a.m. in London.