Pound Has Biggest Weekly Drop in Three Months After Retail Sales

The pound had its biggest weekly decline against the dollar in three months after retail sales fell more in January than analysts forecast, damping optimism the economy is gaining momentum.

The U.K. currency also made a weekly loss versus the euro as the data followed reports earlier this week showing consumer-price inflation slowed in January and the unemployment rate increased last quarter. Losses were tempered today as Vodafone Group Plc completed the sale of its 45-percent stake in Verizon, the biggest deal of the decade, fueling bets this will lead to an inflow into the British currency. U.K. government bonds rose.

“Pound is trading modestly weaker now following the weaker retail-sales report,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “It was only a modest negative though as trend growth remains firm.”

The pound dropped 0.2 percent to $1.6618 at 5:01 p.m. London time, having declined 0.8 percent this week, the most since the period ended Nov. 1. The U.K. currency fell 0.2 percent to 82.57 pence per euro, extending this week’s decline to 1 percent.

Retail sales including fuel dropped 1.5 percent in January, after climbing a revised 2.5 percent the previous, the Office for National Statistics said. The annual inflation rate slowed to 1.9 percent from 2 percent, the office said Feb. 18. The jobless rate climbed to 7.2 percent in the fourth quarter from 7.1 percent in the three months through November, it said the following day.

BOE Minutes

Minutes of the central bank’s Feb. 5-6 meeting released Feb. 19 showed the nine-member Monetary Policy Committee agreed unanimously to keep the Official Bank Rate at an all-time low 0.5 percent, where it has been since March 2009.

Sterling has gained 12 percent in the past 12 months, the best performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes amid optimism an improving economy will convince the central bank to raise interest rates. The dollar gained 1.9 percent and the euro advanced 6.5 percent.

Vodafone agreed in September to sell its stake in Verizon Wireless to Verizon Communications for $130 billion. The sale was completed today with stock payments due on Feb. 24 and cash ones on March 4. The amounts will total $23.9 billion in cash and about $58.6 billion in Verizon Communications shares.

The pound has appreciated 6.9 percent against the dollar since the deal was announced on Sept. 2.

The yield on the benchmark 10-year gilt dropped two basis points, or 0.02 percentage point, to 2.78 percent. The 2.25 percent bond maturing in September 2023 rose 0.14, or 1.40 pounds per 1,000-pound face amount, to 95.58.

Gilts returned 1.6 percent this year through yesterday, according to Bloomberg World Bond Indexes. German securities earned 1.8 percent and U.S. Treasuries gained 1.5 percent.

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