By Gavin Finch
Dec. 18 (Bloomberg) -- The pound fell to 94 pence per euro for the first time on speculation a report forecast to show a drop in retail sales will give the Bank of England more reason to cut borrowing costs to revive the economy.
The pound also declined versus the dollar as traders added to bets the central bank will follow the Federal Reserve in lowering its main interest rate close to zero. A report yesterday showed British jobless claims rose last month at the fastest pace since 1991.
“U.K. rates are going close to zero and the pound is going to suffer until we get there,” said Neil Jones, head of European hedge fund sales at Mizuho Capital Markets in London. “Parity with the euro is the next big psychological barrier.”
The pound slipped as much as 1.3 percent to 94.02 pence per euro, the lowest level since the common currency’s debut in 1999, and was at 93.93 pence at 8:41 a.m. in London. Against the dollar, it dropped to $1.5380, from $1.5536 yesterday.
Retail sales fell 0.6 percent in November after dropping 0.1 percent the previous month, according to the median forecast of 29 economists in a Bloomberg survey. The Office for National Statistics will release the report at 9:30 a.m. in London.
The number of Britons receiving unemployment benefits rose 75,700 to 1.07 million, the highest level since July 2000, the government said yesterday.
Interest-rate futures showed traders raised bets U.K. policy makers will reduce borrowing costs, with the implied yield on the March short-sterling three-month contract dropping 13 basis points today to 1.70 percent. It was at 2.20 percent a week ago.
To contact the reporter on this story: Gavin Finch in London at gfinch@bloomberg.net
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