The pound dropped to a three-week low against the dollar after a U.S. central bank report showed a measure of manufacturing accelerated at the fastest pace in a year, luring investors away from Britain’s currency.
Sterling extended this year’s decline versus the greenback as Bank of England Governor Mark Carney told lawmakers in London that the central bank wasn’t expecting a dramatic increase in interest rates. U.K. government bonds fell for a second day before the Debt Management Office auctions 2 billion pounds ($3.27 billion) of 30-year gilts tomorrow.
“Timing wise the pound move against the dollar followed today’s U.S. data,” said Peter Frank, global head of currency strategy at Banco Bilbao Vizcaya Argentaria SA in London. “Cyclically the U.S. is well ahead of the U.K. For Carney it’s about targeting the supply side of the economy and rate setting is very much lower down on the order of priorities.”
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