By Anchalee Worrachate
Feb. 4 (Bloomberg) -- The pound dropped against the dollar before a survey that’s predicted to show Britain’s services industry contracted in January for a ninth consecutive month, signaling the economic slump is deepening.
The pound also fell against the yen after the National Institute of Economic and Social Research predicted the economy will shrink until the fourth quarter. The Bank of England will cut interest rates by 50 basis points tomorrow to 1 percent to revive the economy, according to a median forecast by economists in a Bloomberg survey.
“The market is running out of reasons to go long risks or sterling at this point, and people are waiting for the BoE decision tomorrow,” said Geoffrey Yu, a currency strategist in London at UBS AG. “But I think the pound might be finding the floor. A lot of bad news has been priced in. The pound is undervalued according to its long-term trend.”
The British currency declined to $1.4419 as of 9:16 a.m. in London, from $1.4458 yesterday. It strengthened to 89.82 pence per euro, from 90.16 pence, snapping a two-day decline. A pound bought 128.42 yen, from 129.32 yen.
Gross domestic product will drop 2.7 percent in 2009, compared with a previous forecast of a 0.9 percent contraction, Niesr, whose clients include the Treasury and the Bank of England, said in a report today. It predicts the global economy will expand 0.5 percent, the slowest pace in 60 years.
The Chartered Institute of Purchasing and Supply index for the services industry was little changed at 40.3 in January, compared with 40.2 the prior month, which was close to the lowest level since 1996, according to a median forecast by economists in a Bloomberg survey.
U.K. government bonds fell. The yield on the two-year note rose almost one basis point to 1.65 percent. The 10-year gilt yield climbed four basis points to 3.79 percent.
To contact the reporter on this story: Anchalee Worrachate in London at aworrachate@bloomberg.net
Posts
No comments:
Post a Comment