U.K. Pound Advances Against Euro


The U.K. pound strengthened against the euro for a second day. The pound fell 6.6 percent against the euro this year. It's little changed versus the dollar.

The British currency climbed to 78.72 pence per euro as of 7:22 a.m. in London, from 78.78 yesterday. It was at $1.9779 from $1.9788.

The pound fell to the weakest level in more than two weeks against the dollar yesterday and government bonds advanced after an index of U.K. retail sales sank to a 25-year low and mortgage approvals declined, fueling speculation the economy is headed toward a recession.

Traders increased bets the Bank of England will lower its benchmark rate, futures showed yesterday. The implied yield on the December short-sterling futures contract fell 4 basis points to 5.75 percent. The central bank has lowered key interest rates three times since November, to 5 percent.

The faltering economy will weaken the pound to $1.90 and to 80 pence per euro by year-end, according to the median forecast of analysts and strategists surveyed by Bloomberg. The yield on the 10-year note will end the year at 4.89 percent, according to a separate survey.


TradingEconomics.com, Bloomberg
7/30/2008 6:32:24 AM