Pound Approaching a Five-Month Low Pares Rally Too Late for WPPLucy Meakin
The pound trading about 0.5 percent from a five-month low versus the dollar comes too late for U.K. companies with large foreign sales that are blaming sterling’s earlier rally for reduced earnings. Today it was WPP Plc’s turn.
The U.K. currency yesterday slid to the least since March after posting its seventh consecutive weekly loss. The decline pared gains amassed in the past 12 months that made sterling the best performer among 10 major currencies tracked by Bloomberg Correlation-Weighted Indexes. That’ll be of little comfort to WPP, the world’s largest advertising company, which said its first-half revenue had been damped by the pound’s broader rally.
This year “looks likely to be another demanding year, as a strong United Kingdom pound and weak faster-growth-market currencies continue to take their toll on our reported results,” London-based WPP said in a statement today.
The pound was little changed at $1.6573 at 4:28 p.m. London time after dropping as low as $1.6501 yesterday, the weakest since March 25. It slid for a seventh week in the five days through Aug. 22, the longest losing streak since September 2008. Sterling was also little changed, at 79.64 pence per euro.
Sterling has appreciated 7.4 percent in the past year, according to the Bloomberg indexes, on bets the Bank of England is moving closer to raising interest rates. The currency’s strength dented revenue at WPP by 8.6 percent, the company said. Revenue rose 2.7 percent from a year earlier to 5.47 billion pounds.
WPP is the latest U.K. company to say it is feeling the pinch of the pound’s appreciation, following similar announcements from online retailer Asos Plc, Burberry Group Plc, Associated British Foods Plc and British American Tobacco Plc.
The nation’s markets were closed yesterday for a public holiday.
U.K. government bonds climbed, with the 10-year gilt yield falling seven basis points, or 0.07 percentage point from Aug. 22, to 2.45 percent. The 2.75 percent bond due in September 2024 rose 0.605, or 6.05 pounds per 1,000-pound face amount, to 102.63.
Gilts returned 6.8 percent this year through yesterday, according to Bloomberg World Bond Indexes. Treasuries earned 4.1 percent and German securities gained 7.1 percent.