Pound Erases Post-Election Gain on Signs U.K. Recovery Faltering

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The pound wiped out almost all of the gains it made versus the dollar after the Conservative Party won a surprise majority in the U.K.’s general election.

Sterling fell for a sixth consecutive day against its U.S. counterpart, the worst run in almost eight months, after data suggested Britain’s economic recovery may be faltering. It weakened for a third day versus the euro after a gauge of U.K. consumer confidence missed the lowest forecast in a Bloomberg economist survey. That followed Thursday’s gross domestic product report, which also fell short of analyst estimates.

“We had a fairly decent rally since the election and at some point it was going to run out of steam,” said Steve Barrow, head of Group-of-10 strategy at Standard Bank Group Ltd. “I continue to see sterling-dollar going down.”

The pound dropped 0.2 percent to $1.5279 at 4:44 p.m. London time, leaving it 1.4 percent lower on the week. It reached $1.5237, the lowest since May 7, when U.K. voters went to the polls to select a new government. Sterling weakened 0.6 percent to 71.91 pence per euro.

Britain’s currency’s posted a second week of losses against the dollar, which has strengthened versus all but one of its 16 major peers since May 22. That day, a report showed a key U.S. inflation measure rose faster than economists predicted and Federal Reserve Chair Janet Yellen said she expected to raise rates this year.

By contrast, GfK NOP Ltd. said Friday its consumer- sentiment index fell to 1 this month from 4 in April. A Bloomberg survey predicted the reading would be unchanged and the lowest forecast was 3. Reports next week may show slowdowns in both services growth and house-price increases, according to separate surveys of economists.

Advantage Dollar

The “dollar will continue to have the upper hand,” said Niels Christensen, chief currency strategist at Nordea Bank AB in Copenhagen. “Everybody expects the Fed to be the first mover on rates. If we get some decent numbers from the U.S. next week it will become more likely the hike is going to be in September than toward the end of the year.”

The yield on benchmark 10-year government bonds fell one basis point, or 0.01 percentage point, to 1.81 percent, falling from 1.93 percent on May 22. The 5 percent gilt due in March 2025 rose 0.12, or 1.20 pounds per 1,000-pound face amount, to 128.43.

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