Pound Slides Most Since July Versus Dollar on Fed Outlook

The pound posted its biggest weekly decline versus the dollar since July as signs the U.S. economy is strengthening fueled bets the Federal Reserve will slow stimulus that tends to debase the greenback.

Sterling fell for a second week against the U.S. currency as a gauge of whether U.K. data is beating forecasts dropped to the lowest level since June. Gauges of consumer sentiment and manufacturing output both fell short of economists’ estimates. The pound strengthened the most in five weeks versus the euro amid speculation the European Central Bank will cut interest rates as soon as next week to revive growth. U.K. gilts dropped, with 10-year yields rising from a two-month low.

The pound fell 1.5 percent this week to $1.5925 at 5 p.m. in London yesterday, the steepest drop since the period ended July 5. Sterling gained 0.8 percent to 84.69 pence per euro, the biggest increase since Sept. 27.

Britain’s currency will appreciate to 82 pence per euro by the end of the year as the U.K. economy outperforms that of the euro region, RBC’s Cole predicted. That would be the strongest since January.

(Source: Bloomberg)