The pound strengthened against the dollar, snapping a two-day decline, before a report that economists said will show U.K. retail sales rose last month.
Sterling trimmed its weekly drop versus the euro. Sales including fuel climbed 0.5 percent from December, when they fell 0.1 percent, according to the median estimate of 24 analysts in a Bloomberg News survey. Sterling was poised for a drop of at least 1.3 percent since Feb. 8 against all 16 of its major peers after the Bank of England released its quarterly Inflation Report on two days ago and Governor Mervyn King said Britain faced a muted economic recovery.
“We had weak retail sale numbers in December and the market is expecting some kind of bounce today,” said Gavin Friend, a foreign exchange strategist at National Australia Bank Ltd. in London. “It’s about whether they surprise versus consensus. If the numbers disappoint, then the pound will get a bit of a knock.”
The pound rose 0.2 percent to $1.5530 at 9:07 a.m. London time, after sliding to $1.5475 yesterday, the lowest since July 26. It still headed for a 1.7 percent drop this week, the biggest decline since the period ended June 1. Sterling appreciated 0.4 percent to 85.86 pence per euro, paring its weekly slide to 1.6 percent.
The pound has depreciated 4.5 percent this year, the second-worst performer after the yen among 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar gained 0.5 percent and the euro rose 1.7 percent.
Gilts rose, pushing the yield on the 10-year security down four basis points, or 0.04 percentage point, to 2.16 percent. The 1.75 percent bond due in September 2022 gained 0.295, or 2.95 pounds per 1,000-pound face amount, to 96.48.
U.K. government bonds handed investors a loss of 2.7 percent this year through yesterday, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. German bunds dropped 1.6 percent and Treasuries fell 0.8 percent.