Pound Falls Versus Euro; Building Data May Show Slowing Growth

Pound Falls Versus Euro; Building Data May Show Slowing Growth

By Agnes Lovasz

Oct. 2 (Bloomberg) -- The pound weakened against the euro before a report that may show an index of construction fell last month, heightening concern growth in Europe's second-largest economy is slowing.

The U.K. currency last week dropped to the lowest in more than 2 1/2 years versus the euro on concern a slowdown in housing and a global credit squeeze threatens to dent economic expansion. Interest-rate futures suggest there's an increasing chance the Bank of England will cut interest rates after a two- day meeting that starts tomorrow.

``The market is trying to assess whether the central bank may be cutting rates,'' said Antje Praefcke, a currency strategist at Commerzbank AG in Frankfurt. ``Some people think the BOE will cut rates and that will weigh on sterling. And we may see those moves in euro-sterling.''

The pound was at 69.718 pence per euro at 7:22 a.m. in London, from 69.630 pence yesterday. It was also at $2.0382, from $2.0472.

U.K. construction, which accounts for 6 percent of the economy, probably slowed, an industry survey is forecast to show today. An index based on a survey of purchasing managers at building companies dropped to 63 from 64.8 in August, the London-based Chartered Institute of Purchasing and Supply will say, according to a Bloomberg survey of economists.

The implied rate on the December interest-rate futures contract fell 2 basis points yesterday to 6.02 percent. The contract settles to the three-month London interbank offered rate for the pound, which has averaged about 16 basis points more than the benchmark rate over the past decade. The Bank of England's key interest rate is 5.75 percent.

Reports yesterday showed U.K. house-price growth stalled in September and banks approved the fewest mortgages in four months in August.

The average cost of a home in England and Wales was unchanged in September from a month earlier, at 176,300 pounds ($358,000), London-based research group Hometrack Ltd. said.

Lenders granted 109,000 loans for house purchase in August, the least since April, according to the Bank of England, as five interest-rate increases in the past year and financial-market turmoil rattled buyers' confidence

from: http://www.bloomberg.com/apps/news?pid=20601083&sid=aJK_ndxkxs20&refer=currency