The pound posted its biggest weekly decline against the euro in almost three months and gilts dropped as French and Spanish borrowing costs fell at their first debt auctions after their credit ratings were cut. The yield on 10-year gilts rose the most in four months as demand for the relative safety of AAA government bonds eased amid signs global growth hasn’t lost momentum. Reports this week showed U.K. retail sales rebounded in December while U.S. initial jobless claims fell to the least in almost four years. Further advances in gilt yields may be limited next week before a report predicted to show the U.K. economy contracted in the fourth quarter of last year. “There are worries that the U.K. economy is heading back into recession,” said Michael Derks, chief strategist at FXPro Financial Services Ltd. in London. “It would not be surprising to see further weakness of the pound against euro in the near term.”
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