Pound Falls Against Euro


The pound stayed near a seven-week low against the euro after the Bank of England left its benchmark interest rate unchanged.

The nine-member Monetary Policy Committee, facing the threat of a recession and the fastest inflation in more than a decade, kept U.K. borrowing costs at 5 percent for a fourth month today, matching the forecasts of all 60 economists in a Bloomberg News survey. The bank, led by Governor Mervyn King, will publish new quarterly inflation forecasts on Aug. 13.

Against the euro, the pound weakened to 79.28 pence per euro by 12:02 p.m. in London, from 79.11 pence yesterday. It was also at $1.9508, from $1.9477 yesterday, when it slipped to $1.9467, the lowest level since June 16.

The U.K. currency may fall to $1.90 and to 80 pence per euro within the next month, Derrick predicted.

The pound slipped earlier after an industry survey showed house prices in the U.K. dropped the most in at least a quarter of a century in July as banks starved the property market of credit, and pessimism about the economy grew.

The average cost of a home in the U.K. fell 8.8 percent in the year to 177,351 pounds ($345,825), HBOS Plc, the country's biggest mortgage lender said today. Prices slipped 1.7 percent from June.

The worst housing-market slump in more than two decades deepened after mortgage approvals fell to the lowest since at least 1999 and consumer sentiment dropped the most since 2004.


TradingEconomics.com, Bloomberg
8/7/2008 6:57:33 AM