BLBG: Pound Drops Below $1.63 as Central Bank Minutes Disappoint `Greedy Bulls'
The pound slumped against all its major counterparts as Bank of England minutes showed policy makers saw “merit in waiting” to examine the effect of higher oil prices, easing speculation that interest rates will rise.
Sterling fell below $1.63 after surpassing $1.64 for the first time in more than a year yesterday. Minutes of the March 10 meeting showed policy makers voted 6-3 to keep rates on hold, even as they forecast inflation may accelerate and surpass 5 percent. Chancellor of the Exchequer George Osborne presents his budget this afternoon.
“The negative reaction in sterling must have been among the more greedy bulls, who may have hoped for another dissenting vote for a hike,” said Daragh Maher, deputy head of global foreign-strategy at Credit Agricole Corporate & Investment Bank in London.
The pound dropped 0.4 percent to $1.6295 at 10 a.m. in London. It yesterday reached $1.6401, the strongest level since Jan. 19, 2010. Against the euro, sterling slipped 0.3 percent to 87.03 pence after earlier touching 86.55, the strongest in a week.
Short-sterling futures rose, sending the yield on the contract expiring in December down four basis points to 1.44 percent, as traders pared bets on a rate increase.
The pound had surged yesterday after data showed consumer prices accelerated more than economists forecast, boosting speculation policy makers may tighten monetary policy.
Gilts rose, pushing the yield on the 10-year security down two basis points to 3.58 percent. The 3.75 percent bond due September 2020 fell 0.18, or 1.8 pounds per 1,000-pound ($1,625) face amount, to 101.37.
Osborne will increase the level at which British workers begin paying tax and offer support for first-time homebuyers in his annual budget today, a person with knowledge of the plans said. He will give updated economic forecasts for the nation when he addresses lawmakers at 12:30 p.m. in London.
To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net.
To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net.
