The pound declined against the dollar after a report showed U.K. retail sales dropped last month as the cold winter weather deterred shoppers. Sterling was little changed against the euro. Retail sales by value at stores open at least 12 months fell 0.3 percent from a year earlier, compared with a 0.7 percent gain in November, the London-based British Retail Consortium said today. Bank of England policy makers will probably maintain their emergency stimulus this week as the government embarks on the biggest fiscal squeeze since World War II. “There is evidence that domestic demand is weakening in anticipation of the fiscal austerity measures to come,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. “Domestic demand is going to remain relatively weak this year. The U.K. recovery will become more reliant on external demand.” The pound declined against the dollar, falling 0.1 percent to $1.5551 as of 9:19 a.m. in London. The British currency was little changed at 83.17 pence per euro. The British Chambers of Commerce sees gross domestic product growth will slow to between 0.2 percent and 0.3 percent in the first two quarters of 2011 from an estimated 0.4 percent in the three months through December, according to the group’s Chief Economist David Kern. U.K. government bonds rose, with the yield on the 10-year gilt falling 0.5 percent to 3.50 percent. Two-year yields were little changed, at 1.25 percent. To contact the reporter on this story: Emma Charlton in London at echarlton1@bloomberg.net To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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