The pound weakened for the first time in four days against the dollar and euro after an industry report showed U.K. employment confidence declined in January and as traders cut bets the currency would strengthen.
Sterling fell against all but one of its 16 major counterparts as analysts said government data tomorrow will show consumer prices fell in January, adding to signs the economy is struggling to recover. The Bank of England will publish its forecasts for growth and inflation on Feb. 13. U.K. government bonds were little changed.
“In the U.K. you have a middling performance in the economy and that’s not good enough to help sterling,” said Peter Frank, global head of foreign-exchange strategy at Banco Bilbao Vizcaya Argentaria SA in London. “Growth simply isn’t good enough. The market had to get out of the net longs.” A long position is a bet an asset will rise.
The pound declined 1.3 percent to 85.67 pence per euro at 4:26 p.m. London time after appreciating to 84.45 pence, the strongest level since Jan. 24. The U.K. currency weakened 0.9 percent to $1.5664.
A gauge of employment prospects dropped to minus 45 from minus 42 in December, Lloyds Banking Group Plc said in an e-mailed report today. A monthly index of job security increased 6 points to minus 16 in January.
The difference in the number of wagers by hedge funds and other large speculators on an advance in the pound compared with those on a drop -- so-called net longs -- declined to 1,174 on Feb. 5 from 10,622 a week earlier.
Futures contracts are agreements to buy or sell assets at a set price and date. The figures reflect holdings in currency-futures contracts at the Chicago Mercantile Exchange as of Tuesday.
The pound has weakened 3.5 percent this year, making it the second-worst performer after the yen among 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro rose 2.5 percent and the dollar advanced 0.6 percent.
The Bank of England’s Inflation Report, due to be published on Feb. 13 “will most likely show an uncomfortable mix of low growth and high inflation projections,” Paul Robson, a senior currency strategist at Royal Bank of Scotland Group Plc in London, wrote in a note to clients. “Our baseline is that policy remains unaltered during 2013.”
The London-based central bank left its benchmark interest rate at a record-low 0.5 percent and its asset-purchase target unchanged at 375 billion pounds at a policy meeting last week.
The 10-year gilt yielded 2.11 percent. The 1.75 percent bond due September 2022 was at 96.91.
Gilts handed investors a loss of 2 percent this year through Feb. 8, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bunds dropped 1.4 percent and Treasuries fell 0.7 percent.