Pound Drops to 3-Week Low Against Euro Before Services Report

By Gavin Finch

July 3 (Bloomberg) -- The pound fell to a three-week low against the euro before an industry survey forecast to show U.K. services grew in June at the weakest pace in at least two years.

The British currency also declined before the European Central Bank announces its latest interest rate decision. The ECB will raise its main refinancing rate by a quarter-percentage point to 4 percent today, according to all but one of 58 economists a Bloomberg News survey.

``The pound is looking very weak versus the euro,'' said John Hardy, head of foreign exchange strategy in London at Saxo Bank A/S, a Copenhagen-based bank specializing in currencies, stocks, bonds and derivatives. ``The flurry of news out of the U.K. seems to show things getting worse by the day.''

Against the euro, the pound lost 0.2 percent to 79.84 pence by 9:24 p.m. in London, after dropping to 79.86 pence, the weakest since June 9. It fell 0.2 percent to $1.9883, from $1.9930 late yesterday.

An index based on replies from about 700 service companies surveyed by the Chartered Institute of Purchasing and Supply fell to 49.5 from 49.8 in May, according to the median forecast of 33 economists in a Bloomberg survey.

The ECB's rate decision is due at 1:45 p.m. in Frankfurt. President Jean-Claude Trichet will hold a press conference 45 minutes later.

To contact the reporter on this story: Gavin Finch in London at gfinch@bloomberg.net