Pound set for weekly drop against the euro
Published 08/10/2010 | 11:07
The pound headed for its fourth weekly decline against the euro as the National Institute of Economic and Social Research said the economy’s pace of growth more than halved in the third quarter.
Sterling fell to its weakest level in five months against the 16-nation euro today before recovering after a report showed faster-than-expected producer inflation.
Gross domestic product rose 0.5pc in the three months through September, compared with 1.2pc in the quarter through June, the London-based Niesr, whose clients include the Bank of England, said late yesterday.
The BOE yesterday left interest rates at a record low and maintained bond purchases to stimulate the economy.
“In the short term, pressure might still be to the downside for sterling,” said Paul Robinson, head of European currency strategy Barclays in London.
“There is justification for some fear, but it might perhaps be overplayed” as other indicators point to a recovery, he said.
Sterling weakened less than 0.1pc to 87.73 pence per euro as of 9:45am, after earlier depreciating to 88.06 pence, the weakest level since May 7. The currency is 0.8pc weaker since October 1. It lost 0.2pc to $1.5847.
The cost of goods at factory gates rose by 0.3pc in September, according to a report from the UK statistics office today. That’s above the median forecast of 18 economists in a Bloomberg News survey for a 0.1pc gain.
Sterling has lost 5.1pc this year against a basket of its developed-country peers, according to Bloomberg Correlation- Weighted Currency Indexes, amid speculation that the UK’s economic recovery is slowing before government spending cuts are imposed to reduce a record budget deficit.
The statistics office will publish its own first estimate of third-quarter growth on October 26, six days after the government announces details of its cuts.
A report by Halifax yesterday showed UK house prices plunged in September by the most since at least 1983, when the gauge began.
Other data from the Office for National Statistics showed manufacturing output increased in August by more than economists predicted.
UK government bonds rose, with the 10-year yield dropping 3 basis points to 2.90pc. The two-year yield dropped 2 basis points to 0.63pc.