Pound Declines Versus Euro as Deficit Widens, Confidence Drops


Eshe Nelson
Bloomberg
December 20, 2013

The pound weakened for the first time in three days against the euro after reports showed the U.K. budget deficit widened and consumer confidence unexpectedly declined, damping optimism the recovery is gaining momentum.

Sterling fell from the strongest in two weeks versus the single currency even as separate data confirmed Britain’s economic growth accelerated in the third quarter. The pound has still appreciated at least 0.5 percent against all of its 16 major counterparts in the past three months. U.K. 10-year government bonds rose after yields earlier climbed to the highest level since September.

“We’re coming out of the recession with an already very wide deficit,” said Ian Stannard, head of European foreign-exchange strategy at Morgan Stanley in London. “Normally we would have expected the deficit to have closed up somewhat but that hasn’t been the case so it does risk the deficit widening out once again. That could be a longer-term drag for sterling.”

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