The pound weakened for a third day versus the euro as a measure of whether U.K. economic data has been beating analysts’ expectations dropped to the lowest level in a month, damping investor demand for the currency.
Sterling dropped the most in more than four months versus the yen after reports last week showed U.K. factory output unexpectedly stagnated in November and a gauge of services activity slowed. Britain’s currency declined for the first time in four days against the dollar as oil-engineering company Amec Plc agreed to buy U.S.-traded Foster Wheeler AG for $3.2 billion. U.K. government bonds advanced, with 10-year yields falling to the lowest in five weeks.
“Our U.K. data surprise index has been turning over quite sharply,” said Chris Walker, a foreign-exchange strategist at Barclays Plc in London. “There tends to be a reasonably strong correlation between the currency and the index.” We remain positive on sterling, but there are risks, he said.