The pound weakened for a second day against the euro amid speculation the Bank of England will expand its bond-buying program to spur growth this year after keeping interest rates unchanged.
Sterling reached a five-month low against the Australian dollar and gilts outperformed German bunds. The Monetary Policy Committee kept its benchmark rate at 0.5 percent and maintained its asset-purchase target at 275 billion pounds ($422 billion), in line with economists’ estimates. Citigroup Inc. and Royal Bank of Scotland Group Plc predict the central bank will boost the amount next month. A separate report showed manufacturing fell in November.
“The U.K. is in a vulnerable position given its exposure to the euro region,” said Ian Stannard, head of European currency strategy at Morgan Stanley in London. “We expect the Bank of England to expand its quantitative-easing program, possibly next month, to support the economy.”
The pound declined 0.2 percent to 83.07 pence per euro at 1:12 p.m. London time. Sterling dropped as much as 0.4 percent against the so-called Aussie dollar to the lowest level since Aug. 1. The U.K. currency was little changed at $1.5337.
