Unloved Pound in Worst Week Since March Amid Brexit-Spurred Woesby
Sterling is still the worst-performing G-10 currency in 2016
Pound declines vs dollar even as U.S. payrolls miss estimates
The pound, the developed world’s worst-performing currency this year, suffered its biggest decline in six weeks as a raft of data added to signs the economy is stagnating before a referendum that may see Britain leave the European Union.
As well as posting its first five-day loss since April 8 versus the dollar, sterling had back-to-back weekly declines against the euro, with the Bank of England due to present new economic projections when it sets interest rates on May 12. Manufacturing, construction and services industries all trailed behind economists’ predictions this week, helping U.K. 10-year government bonds on the way to their best week since January. The pound fell Friday even as U.S. payrolls missed analysts’ predictions.
“The data in the U.K. has been pretty bad recently and the one reason is the uncertainty about Brexit,” said Petr Krpata, a foreign-exchange strategist at ING Bank NV in London. “The market at this point is underestimating the risk of an exit and we see more scope for this to be priced into the currency again.”
The pound is bearing the brunt of concern that a potential exit from the world’s largest single market after the June 23 referendum is already hurting the economy. Gilts have been supported, both as a haven and by speculation a Brexit would prompt the BOE to keep rates at a record-low for longer. The central bank and the government are among those to have warned that the vote next month is weighing on confidence and investment.
The pound fell 0.3 percent to $1.4438 as of 5 p.m. London time, leaving it down 1.2 percent this week, the most since March 25. Sterling sank 0.5 percent to 79.10 pence per euro, with a weekly slide of 0.9 percent, following a 0.6 percent drop in the previous five days.
The benchmark 10-year gilt yield fell five basis points, or 0.05 percentage point, to 1.42 percent. It’s down 18 basis points in the week, the most since Jan. 8. The 2 percent security due in September 2025 gained 0.42, or 4.20 pounds per 1,000-pound face amount, to 105.07.