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The Pound Sterling Hits an Eleven Week Low

“The pound approached an 11-week low against the euro amid speculation the Bank of Englandwill maintain stimulus measures that typically debase the currency.

Sterling was within one U.S. cent of the weakest in almost four months after U.K. policy makers led by Governor Mark Carney signaled last week they will keep interest rates at a record low for longer than investors anticipated. Britain’s currency slumped below $1.49 to the lowest in more than three months last week. U.K. government bonds were little changed. Economists predict a report tomorrow will will show industrial production expanded in May.

“The Bank of England want to keep a cautious outlook and that should keep the pound on the back foot,” said John Hardy, head of foreign-exchange strategy at Saxo Bank A/S in London. “If the data begins to turn the wrong way again you have a compelling case for more pound weakness.”

The U.K. currency fell less than 0.1 percent to 86.21 pence per euro at 12:01 p.m. London time after depreciating to 86.33 on July 4, the weakest level since April 17. Sterling traded at $1.4907 after dropping to $1.4858 on July 5, the lowest since March 12.

The U.K. recovery “remains weak” by historical standards and rising market borrowing costs pose a threat to the expansion, the central bank said in a statement after its July 3-4 meeting. The nine-member Monetary Policy Committee kept its benchmark interest rate at a record-low 0.5 percent and its asset-purchase target at 375 billion pounds.

Pound’s Decline

The pound has weakened 2 percent this year, according to Bloomberg Correlation-Weighted Indexes that track 10 developed-nation currencies. The dollar strengthened 7.9 percent and the euro gained 4.9 percent….”

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