Pound Slides Sixth Day Versus Euro Before Bank of England Meets

The pound weakened for a sixth day against the euro amid bets the Bank of England, which meets this week, is more likely to say it favors additional stimulus than either the European Central Bank or Federal Reserve.

The U.K. currency fell the most in three weeks versus the dollar before Britain’s policy makers release their quarterly Inflation Report next week, which will include findings on interest-rate guidance. The ECB and Fed also meet this week. Sterling is headed for a fourth monthly loss versus the euro. U.K. government bonds were little changed.

“We look for sterling to weaken going forward,” said Michael Sneyd, a currency strategist at BNP Paribas SA in London. “The ECB’s activism is not to the same extent as the Bank of England and forward guidance is going to differentiate the Bank of England from the Federal Reserve.”

The pound fell 0.5 percent to 86.90 pence per euro as of 3:36 p.m. London time, set for its longest losing streak since the period ended Jan. 14. Sterling has weakened 1.6 percent this month. The U.K. currency dropped 0.6 percent to $1.5251, the biggest decline since July 5.

BNP Paribas forecasts the pound will decline to 87.50 pence per euro in the next two months, Sneyd said.

The nine-member Monetary Policy Committee led by Governor Mark Carney will keep its bond-purchase program at 375 billion pounds on Aug. 1, according to all except one of 42 economists surveyed by Bloomberg News. Officials will also hold the benchmark interest rate at a record low of 0.5 percent, a separate survey showed.

Forward Guidance

At the previous MPC meeting on July 3-4, Carney’s first, officials signaled that they would keep interest rates at a record low for longer than investors had been betting. The analysis of providing forward guidance to be published in the Inflation Report on Aug. 7 will include an assessment of intermediate thresholds.

Sterling has weakened 1.2 percent in the past month, according to Bloomberg Correlation-Weighted Indexes that track 10 developed-nation currencies. The euro strengthened 0.5 percent and the dollar declined 1.5 percent.

The 10-year gilt yield fell one basis point, or 0.01 percentage point, to 2.31 percent, having declined 13 basis points this month. The 1.75 percent bond due September 2022 rose 0.04, or 40 pence per 1,000 pound face amount, to 95.40.

Gilts generated a loss of 2.8 percent this year through yesterday, according to Bloomberg World Bond Indexes. German bunds fell 1.3 percent and U.S. Treasuries dropped 2.6 percent.

To contact the reporters on this story: Eshe Nelson in London at enelson32@bloomberg.net; Neal Armstrong in London at narmstrong8@bloomberg.net

To contact the editor responsible for this story: Paul Dobson at pdobson2@bloomberg.net

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