Oct. 12 (Bloomberg) -- The pound fell to a six-week low against the euro as reports showed industrial and construction output unexpectedly declined in August, casting doubt on the strength of the U.K. recovery.
Sterling dropped against the dollar for a second week even as a separate report showed house prices rose to a record. The Bank of England kept its benchmark interest rate at a record-low 0.5 percent and maintained its bond-buying stimulus target at 375 billion pounds ($600 billion) at its latest policy meeting. Construction slipped 0.1 percent from July compared with a 0.8 percent gain forecast by economists. Gilts were little changed.
“We have a bearish view on the pound as we think the best of the data is probably behind us,” said Eimear Daly, head of market analysis at Monex Europe Ltd. in London. “The pound has come a long way and further gains may be limited.”
Sterling lost 0.4 percent to 85.05 pence per euro at 4:55 p.m. London time yesterday, when it reached 85.10 pence, the weakest since Sept. 2. The pound slid 0.4 percent to $1.5946. It fell to $1.5914 on Oct. 10, the lowest since Sept. 18.
The U.K. currency advanced 5.3 percent in the past six months, the best performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar rose 1.2 percent and the euro added 5.1 percent.
U.K. industrial production unexpectedly fell 1.1 percent in August, the steepest drop in almost a year, the Office for National Statistics said on Oct. 9. Factory production fell 1.2 percent, while a separate report showed the trade gap narrowed less than economists forecast in the three months through August.
U.K. home values increased 0.5 percent from August to an average 235,534 pounds, London-based real-estate researcher Acadametrics and LSL Property Services Plc said yesterday.
The Bank of England’s Monetary Policy Committee, led by Governor Mark Carney, said in August it would keep interest rates low until unemployment, currently at 7.7 percent, falls below 7 percent.
The 10-year gilt yield was little changed since Oct. 4, at 2.73 percent. The price of the 2.25 percent bond due in September 2023 was 95.835.
Inflation slowed in September, according to economist forecasts before the data on Oct. 15. Consumer prices rose 2.6 percent from a year ago in August when they increased 2.7 percent, according to the median forecast of 34 economists in a Bloomberg News survey.
Gilts lost 3.1 percent this year through Oct. 10, according to Bloomberg World Bond Indexes. German bonds dropped 2 percent and U.S. Treasuries declined 2.6 percent.
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