Lukanyo Mnyanda and Andrew MacAskill
Monday, Sept 1, 2008
The British pound fell to the lowest level since April 2006 against the dollar after Chancellor of the Exchequer Alistair Darling said the U.K. faced the worst economic slump in 60 years.
The pound also dropped to its weakest ever versus the euro as investors reduced wagers on higher interest rates by the Bank of England. Darling told the Guardian newspaper in an interview on Aug. 30 the economic slowdown would be “profound and long- lasting.” U.K. bonds rose, pushing the yield on the two-year gilt to the lowest level since May, as an industry report showed house prices slid last month by the most since at least 2001.
“The U.K. data flow is poor and it’s now just a question of which is the straw that breaks sterling’s back,” said Martin McMahon, a currency strategist in Zurich at Credit Suisse Group. “We’re in the process of moving to rate cuts and it’s now just a question of when not if.”
(Article continues below)
The pound fell as much as 1.1 percent to $1.8006, the lowest level since April 2006, before trading at $1.8035 by 9:34 a.m. in London, from $1.8211 last week. Against the euro, the pound slumped to 81.21 pence, the weakest level since the single European currency’s debut in 1999, before trading at 81.14.
The average cost of a home in England and Wales slipped an annual 5.3 percent to 167,000 pounds ($305,000), Hometrack Ltd., a London-based research company, said today. That’s the biggest drop since the index started seven years ago.
The Bank of England said today mortgage approvals fell to the lowest level since 1999. Loans approved for house purchase declined to 33,000 in July, from 36,000 the month before, the central bank said. The decline exceeded the 35,000 expected by economists surveyed by Bloomberg.