The pound depreciates to a three-week low versus the dollar after a government report displayed industrial production sagged down in August, spurring doubt on the strength of the economy in the third quarter. The U.K. currency declined at least 0.2 percent against all of its 16 major counterparts as separate data showed the goods-trade deficit developed less than economists prediction. U.K. government bonds skyrocketed for a third day. Economists predict the Bank of England will keep its benchmark interest rate at a record low when it declares its policy decision tomorrow. Output Slides Industrial output dropped 1.1 percent from July, when it increased 0.1 percent, the Office for National Statistics said. The goods-trade deficit narrowed to 9.63 billion pounds in August from a revised 9.94 billion pounds, the office said in a separate report. Economists in a Bloomberg survey predicted the deficit would shrink to 8.85 billion pounds. Finding Base Sterling is likely to find a base around $1.59 to $1.5950 and the current level offers an opportunity to enter a bet the currency will strengthen, according to Credit Agricole SA. As long as the currency holds above $1.59 that means it isn’t entering a new downtrend, said Manuel Oliveri, a foreign-exchange strategist in London. The industrial production data was not a “game changer,” he said. The yield on the benchmark 10-year gilt fell one basis point, or 0.01 percentage point, to 2.68 percent after dropping to 2.65 percent, the lowest level since Aug. 27. The 2.25 percent bond due September 2023 rose 0.115, or 1.15 pounds per 1,000-pound face amount, to 96.26. Gilts handed investors a loss of 2.7 percent this year through yesterday, according to Bloomberg World Bond Indexes. German bonds dropped 1.8 percent and U.S. Treasuries declined 2.5 percent. The Bank of England will leave its key interest rate at 0.5 percent and its bond-purchase target as 375 billion pounds, according to two surveys of economists. The central bank, which will announce the decisions at noon, has said it will keep the benchmark rate unchanged until unemployment, currently at 7.7 percent, falls below 7 percent.
