BLBG:Pound Reaches 5-Month High Versus Dollar as QE Bets Fade
The pound climbed to a five-month high versus the dollar amid speculation the Bank of England will pause its stimulus program next month.
Sterling appreciated against 12 of its 16 major peers, reaching its strongest level since August 2010 against the euro, and 10-year gilts declined for a third day. U.K. central bank officials said inflation may turn out faster than previously estimated, according to minutes of their April meeting published yesterday, adding to the case against further so-called quantitative easing. The U.K. plans to sell index-linked bonds maturing in March 2029 today.
“There’s still a bit of a half-life occurring from the Bank of England minutes yesterday,” said Lauren Rosborough, a senior foreign-exchange strategist at Societe Generale SA in London. “It’s taking away the probability of further QE any time soon. I expect sterling to outperform.”
The pound rose 0.2 percent to $1.6061 at 9:30 a.m. London time, after climbing to $1.6079, the most since Nov. 14. Sterling was little changed at 81.88 pence per euro. It reached 81.65 pence, the strongest level since Aug. 30, 2010.
Sterling has climbed 1.4 percent in the past month, the second-best performer after the yen among the 10 developed- nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro dropped 0.6 percent.
The U.K. is set to auction as much as 1.35 billion pounds of the inflation-linked securities today. A report two days ago showed U.K. inflation unexpectedly accelerated for the first time in six months in March.
The Debt Management Office will also offer as much as 3 billion pounds of bills tomorrow.
The yield on the 10-year gilt rose four basis points, or 0.04 percentage point, to 2.17 percent. The 4 percent security due March 2022 fell 0.395, or 3.95 pounds per 1,000 pound face amount, to 116.16.
Gilts declined 1.9 percent in the first quarter, the worst start to a year since 1996, according to Bank of America Merrill Lynch indexes. They have returned 0.5 percent this month.
To contact the reporter on this story: Lucy Meakin in London at lmeakin1@bloomberg.net.
To contact the editors responsible for this story: Daniel Tilles at dtilles@bloomberg.net.
