BLBG: Pound Drops to Two-Month Low Versus Dollar as Retail Sales Fall
By Keith Jenkins
Dec. 17 (Bloomberg) -- The pound plunged to its lowest level in two months against the dollar after data showed U.K. retail sales unexpectedly fell in November.
Sterling also snapped five days of gains against the euro. Sales decreased 0.3 percent on the month after rising 0.6 percent in October, the first decline in six months, the Office for National Statistics said today in London. The median forecast was for a 0.5 percent gain, according to a Bloomberg News survey of 28 economists.
“‘The retail sales data tend to be very volatile,” said Lee Hardman, a foreign exchange strategist at Bank of Tokyo- Mitsubishi Ufj Ltd. in London. “Sterling appears to be particularly vulnerable against the dollar.”
The pound fell 1.3 percent to $1.6118 as of 12:14 p.m. in London, from $1.6334 yesterday. It dropped earlier to $1.6080, the lowest level since Oct 15. Sterling reversed an earlier advance, weakening 0.2 percent to 89.11 pence per euro.
Sterling may fall to $1.5000 within six months, Hardman said.
The U.K. is borrowing more to maintain public spending and lift the economy out of the longest recession on record. The Debt Management Office last week raised its planned gilt sales for the fiscal year through March 2010 by 5.1 billion pounds ($8.3 billion) to a record 225.1 billion pounds.
The central bank kept its benchmark interest rate at a record low of 0.5 percent and maintained its 200 billion-pound ($322 billion) asset-purchase program on Dec. 10. Bank of England policy maker Kate Barker said two days ago the U.K. faces a “bumpy and uneven” recovery.
U.K. government bonds rose, pushing the yield on the 10- year benchmark gilt down 4 basis points to 3.85 percent. The two-year note yield fell 3 basis points to 1.19 percent.
The Debt Management Office sold 850 million pounds of a 1.25 percent inflation-linked gilt maturing in November 2027. Investors bid for a total of 1.36 billion pounds, 1.6 times the amount of bonds on offer.
To contact the reporter on this story: Keith Jenkins in London at Kjenkins3@bloomberg.net
