BLBG: Pound Climbs to Highest Against Dollar This Year on Earnings
The pound rose to the highest level this year against the dollar after ICAP Plc posted increased profit and Marks & Spencer Group Plc’s net income beat analysts expectations, spurring speculation the worst of the British recession is over.
The pound broke through $1.55, and climbed versus the euro, on speculation the government has begun talks on selling stakes in part-nationalized banks, driving the FTSE 100 Index up 1.5 percent. Gilts fell as the Treasury sold 1.25 billion pounds ($1.93 billion) of 30-year bonds today. It plans to issue a record 5 billion-pound auction of notes due March 2014 in two days.
“News from the corporate front is pretty encouraging and that’s supporting the pound,” said Jeremy Stretch, a senior currency strategist at Rabobank International in London. “Markets are looking through the debris for pieces of good news and then acting accordingly.”
The pound advanced as much as 1.1 percent to $1.5514, the strongest since Dec. 18, and was at $1.5490 by 1 p.m. in London. It appreciated 0.4 percent to 87.98 pence per euro, after climbing to 87.86 pence, the highest level since May 7.
The yield on the 10-year gilt rose two basis points to 3.50 percent. The two-year note yield advanced two basis points to 1.02 percent. Bond yields move inversely to prices.
ICAP, the world’s biggest broker of transactions between banks, said profit rose 4 percent to 175 million pounds in the year to March 31. Marks & Spencer reported net income of 508 million pounds, beating the 446 million-pound average estimate of 15 analysts compiled by Bloomberg.
U.K. Bank Stakes
The Financial Times reported that the U.K. government has begun talks with sovereign wealth funds and other investors about selling stakes in part-nationalized British banks as it seeks to tap a revival in confidence in financial stocks. The newspaper cited people briefed on the plans.
Bonds pared losses and the pound stayed higher after a report showed U.K. inflation slowed more than economists forecast in April, to the weakest level in 15 months.
Consumer prices rose an annual 2.3 percent, the Office for National Statistics said today in London. The median forecast in a Bloomberg News survey of 28 economists was 2.4 percent. The retail price index measure of inflation dropped an annual 1.2 percent, the most since records began in 1948.
Gilts advanced yesterday after the Bank of England bought 3.5 billion pounds of debt. The central bank said May 7 it will expand its asset-purchase program to 125 billion pounds from 75 billion pounds to spur growth and fight deflation.
Today’s debt sale is part of a plan to auction a record 220 billion pounds of gilts this fiscal year, 50 percent more than last year, to help drag the economy out of the recession. The Debt Management Office didn’t find enough buyers at a sale of gilts on March 25, the first so-called failed auction since 2002.
