The pound fell to a 12-month low versus the dollar as the Bank of England held interest rates at a record low amid signs Britain’s economic recovery is ebbing.
Sterling declined the most in a week, even as a report today showed U.K. industrial production expanded more than analysts estimated. Separate data showed house prices dropped last month. The euro gained versus the pound as European Central Bank President Mario Draghi said its asset-purchase program would last at least two years. U.K. 10-year government bonds climbed. The central bank publishes its quarterly Inflation Report next week.
“There is little reason, while there are so few inflationary pressures, to start gambling with the policy normalization process,” said Neil Mellor, a currency strategist at Bank of New York Mellon in London. “I don’t think now is the time and the Inflation Report will reflect that. The consensus is that they will downgrade growth, the housing market will be central to that.”