Saturday, March 2, 2013

Pound Crashes on shrinking manufacturing data


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The pound weakened through $1.50 for the first time since since July 2010 after an industry report showed U.K. manufacturing unexpectedly shrank in February.

Sterling dropped for the third time in four days versus the euro as the Bank of England said mortgage approvals declined in January, signaling the housing market is struggling to recover. The pound has dropped the most of any major currency this year as speculation the central bank will need to add more monetary support to the faltering economy damped demand. U.K. government bonds rose, with 10-year yields set for their biggest weekly drop since November 2011.

“The data was supposed to be good and it came out negative so that has taken the rug out from under sterling’s feet,” said Jane Foley, a senior foreign-exchange strategist at Rabobank International in London. “There is an array of negative fundamentals for the U.K., so it’s very difficult to see silver linings. I think sterling will be weak all year.”

The pound dropped 1 percent to $1.5018 at 4:40 p.m. London time after sliding to $1.4986, the lowest since July 13, 2010. The U.K. currency depreciated 0.4 percent to 86.43 pence per euro. It reached 88.15 pence on Feb. 25, the weakest level since Oct. 28, 2011. The pound has depreciated 5.5 percent this year, the worst performer among 10 developed-market currencies tracked by Bloomberg Correlation-Weighted Indexes.

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