Pound Bears Return as Industrial Data Add to U.K. Economy Woes

  • Sterling is worst-performing G-10 currency this year
  • Ten-year gilt yield drops to lowest level in a month

Pound bears revived their attack as industrial production data added to signs that reasons to sell are mounting as Britain heads toward a referendum on whether to end its membership of the European Union.

Sterling weakened for the first time in three days versus the euro as figures from the Office for National Statistics showed output rose 0.3 percent, less than the 0.5 percent gain predicted in a Bloomberg survey of economists. The Bank of England announces its interest-rate decision and releases its latest economic and inflation forecasts on Thursday. U.K. 10-year government bond yields fell to the lowest in a month.

Even after a rebound in the past month, the pound is still the worst performer this year among currencies of Group-of-10 nations, weighed down by weak economic data and concern that the U.K.’s possible exit from the trading bloc will further derail investment. Reports last week showed manufacturing, construction and services industries all trailed behind economists’ predictions.

“The second quarter doesn’t look that great for the U.K. economy,” said Alvin T. Tan, a London-based foreign-exchange strategist at Societe Generale SA. “It might pass if we get a referendum result that keeps the U.K. in the EU. However, probably we are not going to see a bounce in the data for a couple of months at least, and therefore the pound should continue to be under pressure.”

Pound Slides

The pound weakened 0.5 percent to 79.10 pence per euro as of 4:08 p.m. London time, after strengthening 0.4 percent in the previous two days. Sterling was little changed at $1.4455.

The U.K. currency has retreated as surveys showed the result of the June 23 referendum is too close to call, even amid increasing international support for Britain to stay within the world’s largest trading bloc. Five former NATO secretaries general and 13 former U.S. foreign, defense and security chiefs urged against backing a so-called Brexit, saying it would weaken both the U.K. and the EU.

Benchmark 10-year gilt yields were little changed at 1.39 percent, after falling to 1.37 percent, the lowest since April 11. The price of the 2 percent bond due in September 2025 was 105.275 percent of face value.

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