Pound Has Longest Losing Streak in 16 Months as Data Disappoints

The pound declined for a fourth week against the dollar, the longest losing streak in more than a year, as U.K. economic data from manufacturing output to consumer confidence was weaker than economists predicted.

Sterling dropped to the lowest level in seven weeks versus the dollar after data showed the U.S. economy grew more than analysts forecast and employers added more than 200,000 jobs for the sixth consecutive month, boosting expectations for higher Federal Reserve interest rates. Britain’s currency depreciated against the euro for the first week since the period ended July 11. U.K. government bonds were little changed.

“Sterling declined because of various data results that have been uniformly disappointing this week but not dire,” said Peter Frank, global head of Group-of-10 and Asia currency strategy at Banco Bilbao Vizcaya Argentaria SA in London. “We have a forecast for a mild underperformance of sterling in a short-to-medium term period where we think the market has got ahead of itself on how much growth there is likely to be in U.K. economy and what the reaction function will be of the Bank of England.”

The pound dropped 0.8 percent this week to $1.6832 as of 5:11 p.m. London time yesterday, when it reached $1.6814, the lowest since June 12. The fourth week of declines is the longest run since March 8, 2013. The U.K. currency weakened 0.9 percent to 79.80 pence per euro, the steepest weekly fall since the period ended Feb. 21.

BBVA forecasts the pound will depreciate to $1.65 by the end of September, Frank said.

Output Slows

A gauge of U.K. manufacturing slipped to 55.4 last month from a revised 57.2 in June, according to figures released by Markit Economics yesterday. The median forecast in a Bloomberg survey of analysts was for a reading of 57.2. An index of consumer sentiment fell to minus 2 in July from 1 in June, GfK said on July 31.

The U.S. economy grew at a 4 percent annualized rate in the second quarter, data showed on July 30. U.S. employers added 209,000 jobs last month after a revised 298,000 gain in June, a Labor Department report showed yesterday.

The benchmark 10-year gilt yielded 2.55 percent, compared with 2.57 percent on July 25. The rate dropped to 2.53 percent on July 29, the lowest since May 29. The price of the 2.25 percent bond maturing in September 2023 was 97.595.

Bank of England officials will keep the benchmark interest rate at a record-low 0.5 percent when they announce this month’s monetary policy decision on Aug. 7, according to all 47 economists surveyed by Bloomberg.

Gilts returned 4.7 percent this year through July 31, Bloomberg World Bond Indexes show. That compares with a 5.5 percent gain for German securities and 3.2 percent for Treasuries.

To contact the reporter on this story: Eshe Nelson in London at enelson32@bloomberg.net

To contact the editors responsible for this story: Paul Dobson at pdobson2@bloomberg.net Keith Jenkins, Neal Armstrong

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