Pound Little Changed Versus Dollar Before Retail Sales Report

By Lukanyo Mnyanda

Nov. 20 (Bloomberg) -- The pound was little changed against the dollar before a government report that will probably show retail sales slid in October as another pillar of the British economy weakens amid a looming recession.

Sales declined 0.9 percent in the month, after a 0.4 percent drop in September, the Office for National Statistics will say today, according to the median forecast of 27 economists surveyed by Bloomberg. The Bank of England signaled yesterday it's prepared to cut interest rates further, after reducing the main rate 1.5 percentage points this month to the lowest level since 1955.

``I expect to see the same aggressiveness'' from the Bank of England, Neil Jones, head of European hedge-fund sales in London at Mizuho Capital Markets, said in a Bloomberg Television interview yesterday. ``We're experiencing the gradual depreciation of the pound and I expect further declines.''

The pound was at $1.4938 as of 7:03 a.m. in London, from $1.4952 yesterday, when it reached the highest level since Nov. 12. The U.K. currency is down 25 percent against the dollar this year. Against the euro, it traded at 83.72 pence, snapping a four- day gain, from 83.55 pence. It reached a record low of 86.63 pence last week.

U.K. policy makers, led by Governor Mervyn King, considered a bigger reduction in the benchmark rate than the 1.5 percentage points announced Nov. 6, according to minutes of their meeting, released yesterday. The Bank of England discussed the need for a cut to less than 2.5 percent. The Monetary Policy Committee voted to lower the rate to 3 percent.

Ten-year government bonds, which are more sensitive to the inflation outlook, rose yesterday. The yield slipped four basis points to 4.04 percent. The 5 percent security due March 2018 advanced 0.29, or 2.9 pounds per 1,000-pound ($1,495) face amount, to 107.34. The yield on the two-year note increased five basis points to 2.15 percent. Yields move inversely to bond prices.

The U.K. is scheduled to sell 3 billion pounds of 4.50 percent notes maturing in March 2019 today.

The retail sales report is scheduled for release at 9:30 a.m. in London.

To contact the reporter on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net