BLBG: Pound Trades Near Four-Month High Against Dollar as FTSE Gains
The pound rose to the strongest in almost four months against the dollar as reports showed the decline in the nation’s commercial property and construction markets is easing and the benchmark stock index advanced.
The U.K. currency also climbed to the highest level since April 22 versus the euro as the Royal Institution of Chartered Surveyors said the rate of decline in demand for U.K. office and retail space eased in the first quarter, adding to optimism the recession may be waning. The FTSE 100 Index rose for a third time in four days. Gilts declined as a separate report showed U.K. construction shrank at a slower pace in April.
“I’m reasonably confident we’ve passed the low point and that’s underpinning the resilience in sterling,” said Jeremy Stretch, a senior currency strategist in London at Rabobank International. “Clearly stocks have had a good run and the risk story is on.”
The pound gained as much as 0.6 percent to $1.5111, the strongest level since Jan. 12, and was at $1.5103 as of 10:15 a.m. in London. It rose 0.8 percent to 88.60 pence per euro.
Investors should “be wary of chasing it too far” and gains by the pound may stall at 88 pence to the euro, according to Stretch.
The net balances for enquiries, demand and confidence in office and retail space were the least negative in a year, the Coventry, England-based RICS said today. That indicated “some hope that the aggressive cuts in monetary policy have provided some limited support for the commercial markets,” RICS said.
Construction Boost
An index based on a survey of purchasing managers at building companies was at 38.1, the highest level since September, the London-based Chartered Institute of Purchasing and Supply and Markit said today. A reading below 50 indicates contraction.
Bank of England next meet May 7 amid evidence the cut in the benchmark interest rate to a record low of 0.5 percent is beginning to work. The central bank also started buying assets with newly created money to stimulate the economy.
An industry report showed last week that manufacturing contracted at the slowest pace in eight months in April while the Bank of England said mortgage approvals rose in March to the highest in 10 months.
The FTSE 100 Index jumped 2.9 percent, pushing the benchmark’s rebound since reaching its low this year on March 3 to 24 percent.
Gilts fell, pushing the two-year gilt yield three basis points higher to 1.08 percent. The 4.25 percent security due March 2011 fell 0.06, or 60 pence per 1,000 pound-face amount, to 105.74. The 10-year yield rose two basis points to 3.56 percent. Bond yields move inversely to prices.
