BLBG: Pound Extends Weekly Decline Against Euro as Retail Sales Slump
The pound weakened against the euro for a fourth day, extending a weekly decline, after a report showed U.K. retail sales slumped the most on record for a December as heavy snowfalls and price rises deterred consumers.
The British currency also weakened against the Norwegian and Danish krone after retail sales fell 0.8 percent from the previous month, when they rose 0.4 percent, the Office for National Statistics said today in London. The median forecast of 22 economists in a Bloomberg News survey was for a 0.2 percent decline.
“Sterling has been underperforming and that definitely continued after the retail number,” Lauren Rosborough, a senior strategist at Westpac Banking Corp. in London, said. “It is a weaker number and might take some of the pressure off the Bank of England to lift rates. It might push expectations out a bit.”
The pound was 0.4 percent weaker at 85.07 pence per euro, bound for a 0.9 percent decline this week. The British currency was little changed at $1.5904, set for a 0.2 percent gain against the dollar for the week.
The coldest December in a century deterred Britons from shopping at a time when stores were counting on a sales boost from the festive holidays. Retailers may face further pressure from a government increase in sales tax as inflation at an eight-month high crimps Britons’ spending power.
Rate Rise Speculation
A report this week showing inflation in Britain is accelerating boosted speculation the central bank may be forced to raise borrowing costs to curb price growth. Consumer inflation quickened to 3.7 percent in December, the statistics office said Jan. 18, faster than the 3.4 percent rate forecast in a Bloomberg survey and up from 3.3 percent in November.
Today’s drop in the pound extended the currency’s second consecutive weekly decline against the common currency as easing concern over Europe’s debt crisis benefited the euro. European leaders have pledged to forge a “comprehensive plan” to contain the sovereign-debt crisis that some analysts say threatens to break up the 17-member monetary union.
“A restructuring of peripheral Europe now looks like a very small probability event,” said Rosborough. “Going into the year there were a lot of short euro positions being put on but those seem to be unwinding.”
To contact the reporter on this story: Garth Theunissen in London gtheunissen@bloomberg.net
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net
