Pound Weakens Against Dollar, Euro

The pound declined against the dollar and the euro after an industry report showed house prices slumped in July, adding to signs the economy is slowing.

The currency fell for a second day as Bank of England policy maker David Blanchflower told the Guardian newspaper the central bank must cut interest rates to support the economy, which is headed for a recession that may last more than a year.

The British currency fell to $1.9966 by 12:37 p.m. in London, from $1.9989 on July 18. Against the euro, it declined to 79.46 pence from 79.30 pence. The pound was the second-worst performer against the dollar among 16 of the most-active currencies tracked by Bloomberg.

The average asking price for a home in the U.K. fell an annual 2 percent to 235,219 pounds ($469,544), Rightmove Plc, Britain's most-used property Web site, said today. On the month, prices declined 1.8 percent, the biggest drop since December.

U.K. government bonds fell, paring earlier gains, after Bank of America Corp., the biggest U.S. consumer bank and home lender, said profit fell less than analysts estimated, easing concern that losses from the global credit seizure are spreading.

House prices will fall about 10 percent this year and 6 percent in 2009, the Ernst & Young Item Club, a forecasting group which uses the same model as the Treasury, said today.

Retail sales in June may drop 2.6 percent after an unexpected 3.5 percent increase the month before, a survey of economists by Bloomberg showed. The Office for National Statistics is scheduled to release the figure on July 24.

Traders pared bets on higher U.K. interest rates, with the implied yield on the December short-sterling futures contract falling 5 basis points to 5.89 percent today. The central bank has lowered the key interest rate three times since November, to 5 percent.

Pound Weakens Against Dollar, Euro

TradingEconomics.com, Bloomberg
7/21/2008 7:14:36 AM