BLBG: Pound Weakens Against Euro as Home Sellers Reduce Their Prices
By Paul Dobson
Nov. 16 (Bloomberg) -- The pound weakened against the euro after U.K. home sellers reduced asking prices in November for the first time in three months, raising concerns that the U.K. may continue to trail peers in emerging from the recession.
The U.K. currency pared an earlier gain against the dollar. Average home prices fell 1.6 percent to 226,440 pounds from October, when they rose 2.8 percent, Rightmove Plc said today. A report last week showed the euro-region economy grew 0.4 percent in the third quarter, while the U.K. said last month it remained mired in recession.
“The Rightmove data was a reminder that the strength of the underlying recovery in the U.K. is a little more hesitant that in other major economies,” said Ned Rumpeltin, a currency strategist at Nomura International Plc in London. “The divergence in the near-term growth prospects between the U.K. and the continent is likely to keep investors more cautious toward sterling.”
The pound weakened 0.4 percent to 89.68 pence per euro as of 10:47 a.m. in London and was at $1.6682.
The yield on the U.K.’s short-sterling interest-rate futures contract expiring in June 2010 declined 2 basis points to 1.1 percent as investors pared bets the Bank of England will raise borrowing costs.
The Bank of England will release on Nov. 18 the minutes of this month’s meeting when policy makers expanded their asset- buying program by 25 billion pounds ($42 billion).
‘A Little Nervous’
“People are a little nervous there will still be more talk of further quantitative easing in the minutes,” said Jeremy Stretch, a senior currency strategist at Rabobank International.
The U.K. currency earlier strengthened as much as 0.5 percent against the dollar after data showed futures traders last week decreased bets that the pound will decline against the dollar.
The difference in the number of wagers by hedge funds and other large speculators on a decline in the pound against the dollar compared with those on a gain -- so-called net shorts -- was 15,857 on Nov. 10, compared with net shorts of 18,905 a week earlier, data published Nov. 13 by the Washington-based Commodity Futures Trading Commission show.
U.K. government bonds advanced, pushing the yield on the 10-year gilt 5 basis points lower at 3.75 percent. The yield on the two-year security dropped 3 basis points to 1.30 percent.
To contact the reporter on this story: Paul Dobson in London at pdobson2@bloomberg.net
