Pound Posts Monthly Loss


The pound fell to the lowest level in more than four months against the euro after a report showed consumer confidence held near a record low in August, strengthening the case for lower interest rates.

The pound also had its biggest monthly drop in almost 16 years versus the dollar after London-based research group GfK NOP said a confidence index based on a survey of 2,001 people rose 3 points from July's minus 39, which was the weakest since the data began in 1974. Gilts rose, pushing the yield on the 10-year bond to near the lowest level since April.

The U.K. currency fell as much as 0.4 percent to 80.69 pence per euro, the weakest level since April 16, and was at 80.62 by 4:45 p.m. in London. It dropped 2.3 percent in August, the steepest monthly loss since March. The pound was at $1.8190, posting its biggest one-month drop since sinking 12 percent in October 1992.

The confidence data, together with a report showing luxury- home values registered their first annual fall in five years this month, reinforce speculation economic growth may slow enough for the Bank of England to cut its 5 percent benchmark interest rate.

The average value of houses and apartments in London's nine most expensive neighborhoods dropped 1.6 percent from August 2007, broker Knight Frank LLP said today in a statement. Values fell 1.3 percent from July, a fourth monthly decline. A report yesterday showed U.K. house prices had their biggest annual drop in almost two decades.


TradingEconomics.com, Bloomberg
8/29/2008 9:15:01 AM