Pound Declines for Fourth Week Amid Euro-Area Deflation Concern
The pound fell versus the dollar, completing a fourth weekly decline, as a survey showed investors are increasingly pessimistic about the economy in the euro area, Britain’s biggest trading partner.
U.K. government bonds rose before a report next week that analysts said will show inflation stayed at a five-year low last month as oil prices fell. Almost two-thirds of Bloomberg customers in a survey conducted this week said the euro area is weakening, while 89 percent saw risk of slower price growth or deflation as a greater threat to the region over the next year than inflation. The Bank of England earlier this week cut its U.K. growth forecast for 2015 and 2016.
“The U.K. is not immune from spillover effects from the euro zone,” said Peter Kinsella, a senior foreign-exchange strategist at Commerzbank AG in London. “It is clear that the market is pricing out Bank of England rate hikes until late 2015 at the earliest. As a result, you are seeing some position-squaring that put downward pressure on the pound.”
Sterling dropped 0.4 percent to $1.5651 at 4:34 p.m. London time after falling to $1.5593, the least since Sept. 6, 2013. The U.K. currency, which declined 1.4 percent in the week, hasn’t slipped for four consecutive weeks since August. The pound depreciated 0.5 percent to 79.60 pence per euro and touched 79.82 pence, the weakest level since Oct. 16. Continue Reading.
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